Sorrento Therapeutics, Inc. (Form: 10-Q, Received: 11/09/2020 06:02:17)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2020

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

For the transition period from to

Commission File Number 001-36150

SORRENTO THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

33-0344842

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification Number)

4955 Directors Place

San Diego, California 92121

(Address of Principal Executive Offices)

(858) 203-4100

(Registrant’s Telephone Number, Including Area Code)

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

Title of each class:		Trading Symbol (s)		Name of each exchange on which registered:
Common Stock, $0.0001 par value		SRNE		The Nasdaq Stock Market LLC

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

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares of the issuer’s common stock, par value $0.0001 per share, outstanding as of October 23, 2020 was 262,938,148.

Sorrento Therapeutics, Inc.

Form 10-Q for the Quarter Ended September 30, 2020

Table of Contents

Part I	Financial Information	3
Item 1.	Consolidated Financial Statements (Unaudited)	3
	Consolidated Balance Sheets (Unaudited) as of September 30, 2020 and December 31, 2019	3
	Consolidated Statements of Operations (Unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019	4
	Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019	5
	Consolidated Statements of Stockholders’ Equity (Unaudited) for the Three and Nine Months Ended September 30, 2020 and 2019	6
	Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2020 and 2019	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	34
Item 4.	Controls and Procedures	34

Part II	Other Information	35
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	36
Item 5.	Other Information	45
Item 6.	Exhibits	45
SIGNATURES		49

PART I. FINANCIAL INFORMATION

Item 1.Consolidated Financial Statements.

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except for share amounts; unaudited)

ASSETS	September 30, 2020			December 31, 2019
Current assets:
Cash and cash equivalents	$	75,176		$	22,521
Restricted cash		—			13,098
Accounts receivables, net		14,768			14,454
Inventory		2,144			3,362
Prepaid expenses and other		13,900			14,153
Total current assets		105,988			67,588
Property and equipment, net		29,454			29,888
Operating lease right-of-use assets		44,833			46,384
Intangibles, net		79,967			63,308
Goodwill		38,298			38,298
Equity investments		256,420			262,241
Restricted cash		45,000			45,150
Other, net		2,125			4,775
Total assets	$	602,085		$	557,632
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	22,849		$	27,630
Accrued payroll and related benefits		17,930			15,914
Accrued expenses		24,562			18,728
Current portion of deferred revenue		4,170			3,643
Acquisition consideration payable		398			908
Current portion of derivative liabilities		—			8,800
Current portion of debt		18,529			36,261
Current portion of operating lease liabilities		3,687			3,322
Total current liabilities		92,125			115,206
Long-term debt, net of discount		149,459			199,088
Deferred tax liabilities, net		7,055			9,043
Deferred revenue		113,477			114,389
Derivative liabilities		42,900			35,000
Operating lease liabilities		51,236			52,111
Other long-term liabilities		549			39
Total liabilities	$	456,801		$	524,876
Commitments and contingencies (See Note 10)
Equity:
Sorrento Therapeutics, Inc. equity
Preferred stock, $0.0001 par value; 100,000,000 shares authorized and no shares issued or outstanding		—			—
Common stock, $0.0001 par value 750,000,000 shares authorized and 261,737,622 and 167,798,120 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		28			18
Additional paid-in capital		1,141,208			788,122
Accumulated other comprehensive gain (loss)		444			(270	)
Accumulated deficit		(886,776	)		(659,818	)
Treasury stock, 7,568,182 shares at cost at September 30, 2020, and December 31, 2019		(49,464	)		(49,464	)
Total Sorrento Therapeutics, Inc. stockholders’ equity		205,440			78,588
Noncontrolling interests		(60,156	)		(45,832	)
Total equity		145,284			32,756
Total liabilities and stockholders’ equity	$	602,085		$	557,632

See accompanying notes to unaudited consolidated financial statements

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except for per share amounts; unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenues:
Net product revenues	$	7,874		$	3,810		$	18,916		$	11,868
Service revenues		3,879			1,968			9,565			6,530
Total revenues		11,753			5,778			28,481			18,398
Operating costs and expenses:
Cost of products sold		549			2,839			1,796			3,868
Cost of services		2,122			2,387			5,563			6,947
Research and development		32,003			27,610			77,307			78,019
Acquired in-process research and development		34,884			—			39,765			75,301
Selling, general and administrative		24,265			25,234			75,027			78,128
Intangible amortization		1,034			991			3,018			2,949
Total operating costs and expenses		94,857			59,061			202,476			245,212
Loss from operations		(83,104	)		(53,283	)		(173,995	)		(226,814	)
Other income (loss)		238			(221	)		179			(203	)
Loss on debt extinguishment		—			—			(51,939	)		—
Gain (loss) on derivative liabilities		(1,000	)		(10,700	)		5,900			(35,792	)
(Loss) gain on foreign currency exchange		30			(521	)		7			(619	)
Interest expense		(2,563	)		(9,459	)		(17,686	)		(28,059	)
Interest income		1			182			22			1,021
Loss before income tax		(86,398	)		(74,002	)		(237,512	)		(290,466	)
Income tax expense (benefit)		145			(221	)		(2,050	)		(782	)
Loss on equity method investments		(566	)		(1,431	)		(5,821	)		(3,902	)
Net loss		(87,109	)		(75,212	)		(241,283	)		(293,586	)
Net loss attributable to noncontrolling interests		(3,086	)		(10,797	)		(14,324	)		(64,338	)
Net loss attributable to Sorrento	$	(84,023	)	$	(64,415	)	$	(226,959	)	$	(229,248	)
Net loss per share - basic per share attributable to Sorrento	$	(0.33	)	$	(0.49	)	$	(1.05	)	$	(1.83	)
Net loss per share - diluted per share attributable to Sorrento	$	(0.33	)	$	(0.50	)	$	(1.05	)	$	(2.00	)
Weighted-average shares used during period - basic per share attributable to Sorrento		251,211			130,800			217,050			125,240
Weighted-average shares used during period - diluted per share attributable to Sorrento		257,670			140,445			223,509			132,265

See accompanying notes to unaudited consolidated financial statements

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands; unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Net loss	$	(87,109	)	$	(75,212	)	$	(241,283	)	$	(293,586	)
Other comprehensive loss (gain):
Foreign currency translation adjustments		669			(177	)		714			(144	)
Total other comprehensive loss (gain)		669			(177	)		714			(144	)
Comprehensive loss		(86,440	)		(75,389	)		(240,569	)		(293,730	)
Comprehensive loss attributable to noncontrolling interests		(3,086	)		(10,797	)		(14,324	)		(64,338	)
Comprehensive loss attributable to Sorrento	$	(83,354	)	$	(64,592	)	$	(226,245	)	$	(229,392	)

See accompanying notes to unaudited consolidated financial statements

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except for share amounts; unaudited)

	Nine Months Ended September 30, 2020
	Common Stock				Treasury Stock							Accumulated
	Shares		Amount		Shares		Amount			Additional Paid-in Capital		Other Comprehensive Income (Loss)			Accumulated Deficit			Noncontrolling Interest			Total
Balance, December 31, 2019		167,798,120	$	18		7,568,182	$	(49,464	)	$	788,122	$	(270	)	$	(659,818	)	$	(45,832	)	$	32,756
Exercise of stock options, net		1,213,924		—							5,074											5,074
Issuance of common stock upon exercise of warrants		33,080,916		3		—		—			92,733		—			—			—			92,736
Issuance of common stock for equity offerings		55,815,693		7		—		—			213,002		—			—			—			213,009
Equity issued for SmartPharm acquisition		1,832,166		—		—		—			19,421		—			—			—			19,421
Other acquisitions, license agreements and investments paid in equity		1,996,803									9,544											9,544
Stock-based compensation		—		—		—		—			13,312		—			—			—			13,312
Foreign currency translation adjustment		—		—		—		—			—		714						—			714
Net loss		—		—		—		—			—		—			(226,959	)		(14,324	)		(241,283	)
Balance, September 30, 2020		261,737,622	$	28		7,568,182	$	(49,464	)	$	1,141,208	$	444		$	(886,776	)	$	(60,156	)	$	145,284

	Three Months Ended September 30, 2020
	Common Stock				Treasury Stock							Accumulated
	Shares		Amount		Shares		Amount			Additional Paid-in Capital		Other Comprehensive Income (Loss)			Accumulated Deficit			Noncontrolling Interest			Total
Balance, June 30, 2020		231,846,901	$	25		7,568,182	$	(49,464	)	$	989,702	$	(225	)	$	(802,753	)	$	(57,070	)	$	80,215
Exercise of stock options, net		287,979		—							1,177											1,177
Issuance of common stock upon exercise of warrants		19,956,874		2		—		—			53,874		—			—			—			53,876
Issuance of common stock for equity offerings		6,816,899		1		—		—			63,764		—			—			—			63,765
Equity issued for SmartPharm acquisition		1,832,166		—		—		—			19,421		—			—			—			19,421
Other acquisitions, license agreements and investments paid in equity		996,803									6,975											6,975
Stock-based compensation		—		—		—		—			6,295		—			—			—			6,295
Foreign currency translation adjustment		—		—		—		—			—		669						—			669
Net loss		—		—		—		—			—					(84,023	)		(3,086	)		(87,109	)
Balance, September 30, 2020		261,737,622	$	28		7,568,182	$	(49,464	)	$	1,141,208	$	444		$	(886,776	)	$	(60,156	)	$	145,284

	Nine Months Ended September 30, 2019
	Common Stock				Treasury Stock							Accumulated
	Shares		Amount		Shares		Amount			Additional Paid-in Capital		Other Comprehensive Income (Loss)			Accumulated Deficit			Noncontrolling Interest			Total
Balance, December 31, 2018		122,280,092	$	13		7,568,182	$	(49,464	)	$	626,658	$	15		$	(367,750	)	$	(1,972	)	$	207,500
Issuance of common stock upon exercise of stock options		158,699		—		—		—			289		—			—			—			289
Issuance of common stock for public placement, net		229,168		—		—		—			947		—			—			—			947
Equity contribution related to Semnur acquisition		—		—		—		—			27,991		—			—			26,600			54,591
Stock-based compensation		—		—		—		—			8,978		—			—			—			8,978
Issuance of 2019 Warrants		—		—		—		—			4,288		—			—			—			4,288
2019 Public offering of common stock and warrants, net of issuance costs		8,333,334		—		—		—			23,322		—			—			—			23,322
Adjustment to noncontrolling interest		—		—		—		—			—		—			—			484			484
Foreign currency translation adjustment		—		—		—		—			—		(144	)		—			—			(144	)
Net loss		—		—		—		—			—		—			(229,248	)		(64,338	)		(293,586	)
Balance, September 30, 2019		131,001,293	$	13		7,568,182	$	(49,464	)	$	692,473	$	(129	)	$	(596,998	)	$	(39,226	)	$	6,669

	Three Months Ended September 30, 2019
	Common Stock				Treasury Stock								Accumulated
	Shares		Amount		Shares		Amount			Additional Paid-in Capital			Other Comprehensive Income (Loss)			Accumulated Deficit			Noncontrolling Interest			Total
Balance, June 30, 2019		122,645,334	$	13		7,568,182	$	(49,464	)	$	665,515		$	48		$	(532,583	)	$	(28,913	)	$	54,616
Issuance of common stock upon exercise of stock options		22,625		—		—		—			30			—			—			—			30
Equity contribution related to Semnur acquisition		—		—		—		—			(409	)		—			—			—			(409	)
Stock-based compensation		—		—		—		—			4,015			—			—			—			4,015
2019 Public Offering of common stock and warrants, net of issuance costs		8,333,334		—		—		—			23,322			—			—			—			23,322
Adjustment to noncontrolling interest		—		—		—		—			—			—			—			484			484
Foreign currency translation adjustment		—		—		—		—			—			(177	)		—			—			(177	)
Net loss		—		—		—		—			—			—			(64,415	)		(10,797	)		(75,212	)
Balance, September 30, 2019		131,001,293	$	13		7,568,182	$	(49,464	)	$	692,473		$	(129	)	$	(596,998	)	$	(39,226	)	$	6,669

See accompanying notes to unaudited consolidated financial statements

SORRENTO THERAPEUTICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands; unaudited)

	Nine Months Ended September 30,
Operating activities	2020			2019
Net loss	$	(241,283	)	$	(293,586	)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization		8,790			8,248
Non-cash operating lease cost		2,802			3,069
Non-cash interest expense and amortization of debt issuance costs		10,440			17,554
Acquired in-process research and development		39,765			75,301
Stock-based compensation		13,312			8,978
Loss on debt extinguishment		51,939			—
(Gain) Loss on derivative liabilities		(5,900	)		35,792
Loss on equity method investments		5,821			3,902
Deferred tax provision		(1,989	)		(782	)
Changes in operating assets and liabilities, excluding effect of acquisitions:
Accounts receivable		(313	)		(7,727	)
Accrued payroll		2,016			4,429
Prepaid expenses, deposits and other assets		4,588			(3,393	)
Accounts payable		(8,556	)		8,782
Accrued expenses and other liabilities		1,544			3,137
Deferred revenue		(385	)		(581	)
Other		(1,258	)		(97	)
Net cash used for operating activities		(118,667	)		(136,974	)
Investing activities
Purchases of property and equipment		(3,840	)		(9,582	)
Purchase of assets related to Semnur, net of cash acquired		—			(17,040	)
Payments related to license agreements		(22,325	)		—
Other acquisitions and investments		(2,344	)		(1,162	)
Net cash used for investing activities		(28,509	)		(27,784	)
Financing activities
Proceeds from equity offerings, net of issuance costs		213,009			24,269
Proceeds from short-term debt, net of issuance costs		7,815			18,858
Proceeds from exercise of stock options and warrants		97,810			289
Repayments of debt and other obligations		(132,819	)		(2,441	)
Net cash provided by (used for) financing activities		185,815			40,975
Net change in cash, cash equivalents and restricted cash		38,639			(123,783	)
Net effect of exchange rate changes on cash		768			(156	)
Cash, cash equivalents and restricted cash at beginning of period		80,769			213,330
Cash, cash equivalents and restricted cash at end of period	$	120,176		$	89,391
Supplemental disclosures:
Cash paid during the period for:
Interest		3,148			10,046
Supplemental disclosures of non-cash investing and financing activities:
Semnur acquisition consideration paid in equity		—			54,591
Semnur acquisition costs incurred but not paid		—			601
SmartPharm acquisition consideration paid in equity		19,421			—
Other acquisitions, license agreements and investments paid in equity		9,544			—
Property and equipment costs incurred but not paid		1,524			1,408
Reconciliation of cash, cash equivalents and restricted cash within the Company’s consolidated balance sheets:
Cash and cash equivalents		75,176			34,649
Restricted cash		45,000			54,742
Cash, cash equivalents, and restricted cash	$	120,176		$	89,391

See accompanying notes to unaudited consolidated financial statements

SORRENTO THERAPEUTICS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

1. Description of Business and Basis of Presentation

Description of Business

Sorrento Therapeutics, Inc., together with its subsidiaries (the “Company”), is a clinical stage and commercial biopharmaceutical company focused on delivering innovative and clinically meaningful therapies to address unmet medical needs.

At its core, the Company is antibody-centric and leverages its proprietary G-MAB™ library and targeted delivery modalities to generate the next generation of cancer therapeutics. These modalities include proprietary chimeric antigen receptor T-cell therapy (“CAR-T”), dimeric antigen receptor T-cell therapy (“DAR-T”), antibody drug conjugates (“ADCs”) as well as bispecific antibody approaches. The Company also has programs assessing the use of its technologies and products in autoimmune, inflammatory, viral and neurodegenerative diseases.

Outside of immuno-oncology programs, as part of the Company’s global aim to provide a wide range of therapeutic and diagnostic products to meet underserved markets, the Company has made investments in non-opioid pain management and is currently conducting preclinical development of multiple therapeutic, vaccine and diagnostic product candidates utilizing its proprietary platforms for the potential treatment, prevention and detection of COVID-19 and SARS-CoV-2.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company’s subsidiaries. For consolidated entities where the Company owns or is exposed to less than 100% of the economics, the Company records net income (loss) attributable to noncontrolling interests in its consolidated statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective noncontrolling parties. All intercompany balances and transactions have been eliminated in consolidation.

These consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Operating results for interim periods are not expected to be indicative of operating results for the Company’s 2020 fiscal year, or any subsequent period. The unaudited interim financial statements included herein reflect all normal and recurring adjustments that are necessary for a fair presentation of the results for the interim periods presented.

Use of Estimates

To prepare consolidated financial statements in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”), management must make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Significant Accounting Policies

During the nine months ended September 30, 2020, there have been no changes to the Company`s significant accounting policies as described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 outside of new accounting pronouncements as described below.

Revenue Recognition

The following table shows revenue disaggregated by product and service type for the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Scilex Pharmaceuticals Inc. product sales	$	7,837	$	3,770	$	18,806	$	11,289
Other product revenue		37		40		110		579
Net product revenue	$	7,874	$	3,810	$	18,916	$	11,868

Concortis Biosystems Corporation	$	2,261	$	1,607	$	5,089	$	4,622
Bioserv Corporation		1,498		233		4,116		1,540
Other service revenue		120		128		360		368
Service revenue	$	3,879	$	1,968	$	9,565	$	6,530

Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to improve financial reporting by requiring timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The amendments in this update were adopted using a modified retrospective transition method as of January 1, 2020, which had no cumulative impact to accumulated deficit.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, to improve the effectiveness of the disclosure requirements for fair value measurements. The ASU is effective for fiscal years and interim periods beginning after December 15, 2019. Amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty will be applied prospectively as of the beginning of the fiscal year of adoption with all other amendments being applied retrospectively to all periods presented upon their effective date. The adoption of the standard had no material impact on the Company’s consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Accounting Standards Codification (“ASC”) Topic 740. The amendments also improve consistent application of and simplify U.S. GAAP for other areas of ASC Topic 740 by clarifying and amending existing guidance. The amendments in this update are effective for interim and annual periods for the Company beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the impact this standard will have on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment (Topic 350). This standard eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. This update also eliminated the qualitative assessment requirements for a reporting unit with zero or negative carrying value. This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, with early adoption permitted, and must be applied on a prospective basis. The adoption of the standard had no material impact on the Company’s consolidated financial statements.

2. Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has negative working capital and recurring losses from operations, recurring negative cash flows from operations and substantial cumulative net losses to date and anticipates that it will continue to do so for the foreseeable future as it continues to identify and invest in advancing product candidates, as well as expanding corporate infrastructure.

The Company has plans in place to obtain sufficient additional fundraising to fulfill its operating, debt servicing and capital requirements for the next 12 months. The Company’s plans include continuing to fund its operating losses and capital funding needs through public or private equity or debt financings, strategic collaborations, licensing arrangements, asset sales, government grants or other arrangements. Although management believes such plans, if executed, should provide the Company sufficient financing to meet its needs, successful completion of such plans is dependent on factors outside of the Company’s control. As such, management cannot conclude that such plans will be effectively implemented within one year after the date that the financial statements are issued. As a result, management has concluded that the aforementioned conditions, among others, raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are issued.

If the Company is unable to raise additional capital in sufficient amounts or on terms acceptable, the Company may have to significantly delay, scale back or discontinue the development or commercialization of one or more of its product candidates. The Company may also seek collaborators for one or more of its current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available. Furthermore, the spread of COVID-19, which has caused a broad impact globally, may materially affect the Company economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could, in the future, negatively affect its liquidity. The consolidated financial statements do not reflect any adjustments that might be necessary if the Company is unable to continue as a going concern.

If the Company raises additional funds by issuing equity securities, substantial dilution to existing stockholders would result. If the Company raises additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific financial ratios that may restrict the Company’s ability to operate its business.

3. Fair Value Measurements

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	Fair Value Measurements at September 30, 2020
	Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	75,176	$	75,176	$	—	$	—
Restricted cash		45,000		45,000		—		—
Total assets	$	120,176	$	120,176	$	—	$	—
Liabilities:
Derivative liabilities - non-current	$	42,900	$	—	$	—	$	42,900
Acquisition consideration payable		398		—		—		398
Acquisition consideration payable - non-current		549		—		—		549
Total liabilities	$	43,847	$	—	$	—	$	43,847

	Fair Value Measurements at December 31, 2019
	Balance		Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	22,521	$	22,521	$	—	$	—
Restricted cash		58,248		58,248		—		—
Total assets	$	80,769	$	80,769	$	—	$	—
Liabilities:
Derivative liabilities	$	8,800	$	—	$	—	$	8,800
Derivative liabilities - non-current		35,000		—		—		35,000
Acquisition consideration payable		908		—		—		908
Acquisition consideration payable - non-current		39		—		—		39
Total liabilities	$	44,747	$	—	$	—	$	44,747

The Company’s financial assets and liabilities carried at fair value are comprised of cash, cash equivalents, restricted cash, derivative liabilities and acquisition consideration payable. Cash and cash equivalents consist of money market accounts and bank deposits that are highly liquid and readily tradable. These investments are valued using inputs observable in active markets for identical securities. The fair value of the acquisition consideration payable is measured on a recurring basis using significant unobservable inputs (Level 3). Acquisition consideration payable is measured using the income approach and discounting to present value the contingent payments expected to be made based on assessment of the probability that the company would be required to make such future payment. There were no changes to the fair value of acquisition consideration payable during the nine months ended September 30, 2020.

Derivative liabilities

The Company recorded a loss on derivative liabilities of $1.0 million and a gain on derivative liabilities of $5.9 million for the three and nine months ended September 30, 2020, respectively, which related to the compound derivative liabilities associated with the Term Loans (as defined in Note 7) and the Scilex Notes (as defined in Note 7). The compound derivative liabilities consist of the fair value of various embedded features. Significant, Level 3 inputs and assumptions for the Term Loans consisted of the estimated probability of restructuring debt arrangements during the first half of 2020 and estimated probabilities of satisfying certain commercial and financial milestones estimated using a with and without discounted cash flow approach. As explained further in Note 7, the Term Loans were paid in full as of September 30, 2020.

As of September 30, 2020, the fair value of the derivative liabilities associated with the Scilex Notes was estimated using the discounted cash flow method under the income approach combined with a Monte Carlo simulation model. This involves significant Level 3 inputs and assumptions. The key assumptions for the Scilex Notes include a 6.6% risk adjusted net sales forecast, an effective debt yield of 18%, estimated probabilities of 55% and 100% of not obtaining marketing approval before July 1, 2023 and March 31, 2021, respectively, and an estimated probability of an initial public offering by Scilex Holding Company (“Scilex Holding”) that satisfies certain valuation thresholds and timing considerations.

The following table includes a summary of the derivative liabilities measured at fair value using significant unobservable inputs (Level 3) during the nine months ended September 30, 2020:

(in thousands)	Fair Value
Beginning Balance at December 31, 2019	$	43,800
Additions		8,800
Re-measurement of Fair Value		(9,700	)
Ending Balance at September 30, 2020	$	42,900

4. Investments

Investments in entities over which the Company has significant influence, but not a controlling interest, are accounted for using the equity method, with the Company’s share of earnings or losses reported in loss on equity method investments. The Company’s equity method investments primarily include an ownership interest in Immunotherapy NANTibody, LLC (“NANTibody”) and NantCancerStemCell, LLC (“NantStem”). The Company’s other equity investments primarily include an ownership interest in ImmunityBio, Inc., NantBioScience, Inc. (“NantBioScience”) and Celularity Inc. These other investments are carried at cost, less impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments.

During the nine months ended September 30, 2020, the Company recorded an impairment loss of approximately $3.8 million related to an equity method investment for which the Company determined the investment’s value is no longer supportable. The loss is included within loss on equity method investments in the Company’s consolidated statement of operations.

NANTibody

In 2013, the Company acquired IgDraSol Inc. (“IgDraSol”), a private company focused on the development of oncologic agents for the treatment of cancer, from a third party unrelated to the NantWorks, LLC (“NantWorks”) affiliated entities for 3.0 million shares of the Company’s common stock and $380,000 of cash for a total purchase price of $29.1 million. This transaction included the acquisition of IgDraSol’s lead compound, Cynviloq^TM, a micellar diblock copolymeric paclitaxel formulation drug product.

In May 2015, the Company entered into an agreement with NantPharma, LLC (“NantPharma”), a NantWorks company, pursuant to which the Company sold to NantPharma all of its equity interests in IgDraSol, which continued to hold the rights to Cynviloq^TM. Pursuant to the agreement, NantPharma paid the Company an upfront fee of $90.1 million, of which $60.0 million was required to be used by the Company to fund two joint ventures, as described below.

In April 2015, the Company and NantCell, Inc. (which subsequently changed its name to ImmunityBio, Inc.) (“NantCell”), a subsidiary of NantWorks, a private company owned by Dr. Patrick Soon-Shiong, established a new entity called Immunotherapy NANTibody, LLC (“NANTibody”) as a stand-alone biotechnology company with $100.0 million initial joint funding. NantCell owns 60% of the equity interest of NANTibody and agreed to contribute $60.0 million to NANTibody. The Company owns 40% of NANTibody and in July 2015, the Company had NantPharma contribute its portion of the initial joint funding of $40.0 million to NANTibody from the proceeds of the sale of IgDraSol. Additionally, the Company and NantCell were allowed to appoint two and three representatives, respectively, to NANTibody’s five-member Board of Directors. NANTibody focuses on accelerating the development of multiple immuno-oncology mAbs for the treatment of cancer, including but not limited to anti-PD-1, anti-PD-L1, anti-CTLA4mAbs and other immune-check point antibodies as well as ADCs and bispecific antibodies.

NANTibody had been formed to advance pre-clinical and clinical immunology assets contributed by the Company and NantCell. The Company continues to hold 40% of the outstanding equity of NANTibody and NantCell holds the remaining 60%. Until July 2, 2017, NANTibody held approximately $100.0 million of cash and cash equivalents, and the Company recorded its investment in NANTibody at approximately $40.0 million. As an equity method investment, the Company’s ratable portion of 40% of money expended for the development of intellectual property assets held by NANTibody would be reflected within income (loss) on equity method investments in its statement of operations. As a result of limited spending at NANTibody, the cash on hand at NANTibody remained at approximately $100.0 million since the inception of the NANTibody joint venture until July 2, 2017. Further, the Company’s equity method investment in NANTibody remained at approximately $40.0 million until July 2, 2017.

In February 2018, NANTibody notified the Company that on July 2, 2017, NANTibody acquired all of the outstanding equity of IgDraSol in exchange for $90.1 million in cash. NANTibody purchased IgDraSol from NantPharma, which is controlled by NantWorks, an entity with a controlling interest in NantCell and NantPharma.

Although the Company has had a designee serving on the Board of Directors of NANTibody since the formation of NANTibody in April 2015, and although the Company has held 40% of the outstanding equity of NANTibody since NANTibody’s formation, neither the Company nor its director designee was given any advance notice of NANTibody’s purchase of IgDraSol or of any board meeting or action to approve such purchase. As such, the Company’s designee on NANTibody’s Board of Directors was not given an opportunity to consider or vote on the transaction as a director and the Company was not given an opportunity to consider or vote on the transaction in its position as a significant (40%) equity holder of NANTibody.

As a result of the July 2, 2017 purchase of IgDraSol, NANTibody’s cash and cash equivalents were reduced from $99.6 million as of June 30, 2017 to $9.5 million as of September 30, 2017, and NANTibody’s contributed capital was reduced from $100.0 million as of June 30, 2017 to $10.0 million as of September 30, 2017, to effect the transfer of IgDraSol from NantPharma to NANTibody. No additional information was provided to the Company to explain why NANTibody’s total assets as of September 30, 2017 were reduced by approximately $90.1 million. The Company requested, but did not receive, additional information from NANTibody for purposes of supporting the value of IgDraSol, including any information regarding clinical advancements in the entity since the sale of IgDraSol by the Company in May 2015.

Prior to the communication of the transfer of IgDraSol from NantPharma to NANTibody, the Company relied on the cash and cash equivalents of NANTibody for purposes of determining the value of its investment in NANTibody, which capital was expended by NANTibody to acquire IgDraSol on July 2, 2017. As a result of the transfer of IgDraSol, the Company reassessed the recoverability of its equity method investment in NANTibody as of July 2, 2017. In doing so, the Company considered the expected outcomes for the intellectual property assets held by NANTibody as of July 2, 2017. As a result of the lack of evidence of any development activity associated with any of the assets held in NANTibody, given the passage of time since the formation of the joint venture, many competitive products from other drug developers worldwide have advanced and/or commercialized for the targeted disease indications of the assets held in NANTibody, and given the Company’s minority interest in NANTibody (the investee), the Company concluded that it does not have the ability to recover the carrying amount of the investment and an other-than-temporary decline in the value of the investment had occurred. Accordingly, an impairment was recorded to the Company’s equity method investment in NANTibody for the three and nine months ended September 30, 2017. The fair value of the Company’s investment in NANTibody was measured at fair value on July 2, 2017 using significant unobservable inputs (Level 3) due to the determination of fair value requiring significant judgment, including the potential outcomes of the intellectual property assets held by NANTibody. For these reasons, fair value was determined by applying the Company’s 40% equity interest in NANTibody to the remaining cash and cash equivalents, which resulted in an impairment of $36.0 million. The impairment resulted in a revised carrying value of the Company’s investment in NANTibody of $3.7 million which approximated its ratable 40% ownership of the cash maintained by NANTibody expected to be used for future research and development. As of September 30, 2020 and 2019, the carrying value of the Company’s investment in NANTibody was approximately $0.6 million and $2.5 million, respectively.

The Company’s investment in NANTibody is reported in equity method investments on its consolidated balance sheets and its share of NANTibody’s income or loss is recorded in loss on equity method investments on its consolidated statement of operations. The financial statements of NANTibody are not received sufficiently timely for the Company to record its portion of earnings or loss in the current financial statements and therefore the Company reports its portion of earnings or loss on a one quarter lag.

NANTibody recorded a net loss of $1.6 million and $1.7 million for the three months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, NANTibody had $6.4 million in current assets, $4.7 million in current liabilities, $0.2 million in noncurrent assets and no noncurrent liabilities.

NantStem

In July 2015, the Company and NantBioScience established a new entity called NantCancerStemCell, LLC (“NantStem”) as a stand-alone biotechnology company with $100.0 million initial joint funding. As initially organized, NantBioScience was obligated to make a $60.0 million cash contribution to NantStem for a 60% equity interest in NantStem, and the Company was obligated to make a $40.0 million cash contribution to NantStem for a 40% equity interest in NantStem. Fifty percent of these contributions were funded in July 2015 and the remaining amounts were to be made by no later than September 30, 2015. The Company had NantPharma contribute its portion of the initial joint funding of $20.0 million to NantStem from the proceeds of the sale of IgDraSol. Pursuant to a Side Letter dated October 13, 2015, the NantStem joint venture agreement was amended to relieve the Company of the obligation to contribute the second $20.0 million payment, and its ownership interest in NantStem was reduced to 20%. NantBioScience’s funding obligations were unchanged. The Side Letter was negotiated at the same time the Company issued a call option on shares of NantKwest that it owned to Cambridge Equities, L.P. (“Cambridge”), a related party to NantBioScience.

A loss related to other-than-temporary impairment of $0.5 million was recognized for the equity investment in NantStem for the year ended December 31, 2018.

The Company is accounting for its interest in NantStem as an equity method investment, due to the significant influence the Company has over the operations of NantStem through its board representation and 20% voting interest. As of September 30, 2020 and 2019, the carrying value of the Company’s investment in NantStem was approximately $18.0 million and $17.8 million, respectively.

The Company’s investment in NantStem is reported in equity method investments on its consolidated balance sheets and its share of NantStem’s income or loss is recorded in loss on equity method investments on its consolidated statement of operations. The financial statements of NantStem are not received sufficiently timely for the Company to record its portion of earnings or loss in the current financial statements and therefore the Company reports its portion of earnings or loss on a one quarter lag.

NantStem recorded a net gain of $0.9 million and a net loss of $0.3 million for the three months ended June 30, 2020 and 2019, respectively. As of June 30, 2020, NantStem had $78.9 million in current assets, $2.2 million in noncurrent assets and no current and noncurrent liabilities.

5. Goodwill and Intangible Assets

At both September 30, 2020 and December 31, 2019, the Company had recorded goodwill of $38.3 million. Goodwill for the Sorrento Therapeutics segment and Scilex segment was $31.6 million and $6.7 million, respectively, as of September 30, 2020. The Company’s Scilex reporting unit had a negative carrying value of net assets and there were no indicators of impairment of goodwill identified.

Intangible assets with indefinite useful lives totaling $33.5 million are included in acquired in-process research and development in the table below. A summary of the Company’s identifiable intangible assets as of September 30, 2020 and December 31, 2019 is as follows (in thousands, except for years):

September 30, 2020	Weighted Average Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization		Intangibles, Net
Customer relationships		6	$	1,585	$	1,419	$	166
Acquired developed technology		19		3,410		1,192		2,218
Acquired in-process research and development		—		33,516		—		33,516
Technology placed in service		15		21,940		2,925		19,015
Patent rights		15		32,720		8,558		24,162
Assembled workforce		5	605		192			413
Internally developed software		1		520		43		477
Total intangible assets			$	94,296	$	14,329	$	79,967

December 31, 2019	Weighted Average Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization		Intangibles, Net
Customer relationships		6	$	1,585	$	1,401	$	184
Acquired developed technology		19		3,410		1,060		2,350
Acquired in-process research and development		—		14,360		—		14,360
Technology placed in service		15		21,940		1,828		20,112
Patent rights		15		32,720		6,922		25,798
Assembled workforce		5		605		101		504
Total intangible assets			$	74,620	$	11,312	$	63,308

Aggregate amortization expense was $1.0 million for each of the three months ended September 30, 2020 and 2019. Aggregate amortization expense was $3.0 million and $2.9 million for the nine months ended September 30, 2020 and 2019, respectively. Estimated future amortization expense related to intangible assets, excluding indefinite-lived intangible assets, at September 30, 2020 is as follows (in thousands):

Years Ending December 31,	Amount
2020 (Remaining three months)	$	1,035
2021		4,400
2022		3,966
2023		3,961
2024		3,870
2025		3,845
Thereafter		25,373
Total expected future amortization	$	46,450

6. Significant Agreements and Contracts

2020 Acquisition

Acquisition of SmartPharm Therapeutics, Inc.

On September 1, 2020, the Company completed the acquisition of SmartPharm Therapeutics, Inc. (“SmartPharm”), a gene-encoded protein therapeutics company developing non-viral DNA and RNA gene delivery platforms for COVID-19, Influenza and rare diseases with broad potential for application in enhancing antibody-centric therapeutics. The total base consideration paid to the holders of capital stock of SmartPharm in the acquisition was approximately $19.5 million, which was comprised of approximately 1.8 million shares of the Company’s common stock and is subject to certain adjustments for net working capital, indebtedness, transaction expenses and cash.

The preliminary purchase price allocation resulted in net identifiable assets of approximately $19.5 million, which includes separate and distinct intangible assets of approximately $19.2 million and other net assets of approximately $0.3 million. The purchase price allocation is preliminary as the Company is still completing the valuation of the intangible assets, assumed liabilities and goodwill. Results of operations since the date of acquisition were not material.

2019 Acquisitions

Acquisition of Semnur Pharmaceuticals, Inc.

In March 2019, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Semnur Pharmaceuticals, Inc. (“Semnur”) and Scilex Holding, whereby Semnur became a wholly-owned subsidiary of Scilex Holding (the “Merger”), and thereby Scilex Holding acquired Semnur’s SEMDEXA^TM (SP-102) technology for consideration valued at approximately $70.0 million, excluding contingent consideration, transaction costs of $3.1 million and liabilities assumed of $4.2 million, which was allocated based on the relative fair value of the assets acquired. The $70.0 million of consideration consisted of approximately $15.0 million in cash and shares of Scilex Holding valued at approximately $55.0 million (the “Stock Consideration”).

Pursuant to the Merger Agreement, Scilex Holding also agreed to pay the holders of Semnur’s capital stock and options (the “Semnur Equityholders”) up to $280.0 million in aggregate contingent cash consideration based on the achievement of certain milestones, which is comprised of a $40.0 million payment that will be due upon obtaining the first approval of a New Drug Application of a Semnur product by the U.S. Food and Drug Administration (the “FDA”) and additional payments that will be due upon the achievement of certain amounts of net sales of Semnur products as follows: (a) a $20.0 million payment upon the achievement of $100.0 million in cumulative net sales of a Semnur product, (b) a $20.0 million payment upon the achievement of $250.0 million in cumulative net sales of a Semnur product, (c) a $50.0 million payment upon the achievement of $500.0 million in cumulative net sales of a Semnur product, and (d) a $150.0 million payment upon the achievement of $750.0 million in cumulative net sales of a Semnur product.

In March 2019, the Company also entered into an Exchange and Registration Rights Agreement (the “Exchange Agreement”) with the Semnur Equityholders. Pursuant to the Exchange Agreement, if within 18 months of the closing of the Merger, 100% of the outstanding equity of Scilex Holding had not been acquired by a third party or Scilex Holding had not entered into a definitive agreement with respect to, or otherwise consummated, a firmly underwritten offering of Scilex Holding’s capital stock that meets certain requirements and includes the Stock Consideration, then the Semnur Equityholders could collectively elect to exchange, during the 60-day period commencing the date that is the 18 month anniversary of the closing of the Merger, the Stock Consideration for shares of the Company’s common stock with a value of $55.0 million (the “Semnur Share Exchange”) based on a price per share of the Company’s common stock equal to the greater of (a) the 30-day trailing volume weighted average price of one share of the

Company’s common stock as reported on the Nasdaq Capital Market as of the consummation of the Semnur Share Exchange and (b) $5.55 (subject to adjustment for any stock dividend, stock split, stock combination, reclassification or similar transaction) (the “Exchange Price”). On September 28, 2020, the Company entered into an amendment to the Exchange Agreement (the Exchange Agreement, as amended, the “Amended Exchange Agreement”) to, among other things, provide that if the Company received notice from the Semnur Equityholders that they will proceed with the Semnur Share Exchange (the “Exchange Notice”), the Company could, in its sole discretion, elect, within seven days of receipt of the Exchange Notice, to exchange all the Stock Consideration and the rights to receive cash from Scilex Holding held by the Semnur Equityholders for an amount in cash equal to $55.0 million, in lieu of issuing $55.0 million of shares of the Company’s common stock at the Exchange Price.

The Semnur acquisition was accounted for as an asset acquisition since substantially all the value of the gross assets was concentrated in a single asset. No contingent consideration was recorded as of December 31, 2019 or September 30, 2020 since the related regulatory approval milestones are not deemed probable until they actually occur. Approximately $75.3 million was expensed as acquired in-process research and development during the three months ended March 31, 2019.

Semnur Cash Exchange Payment

Pursuant to the Amended Exchange Agreement, as described above, on September 28, 2020, the Semnur Equityholders delivered the Exchange Notice. On October 5, 2020, the Company notified the Semnur Equityholders of its election to pay cash, and paid $55.0 million in cash to the Semnur Equityholders in exchange for the Stock Consideration on October 9, 2020. Following the completion of the Semnur Share Exchange, the Company holds approximately 82.3% of the outstanding common stock of Scilex Holding.

License Agreements

License Agreement with ACEA Therapeutics, Inc.

In July 2020, the Company entered into a License Agreement (the “ACEA License Agreement”) with ACEA Therapeutics, Inc. (“ACEA”). Pursuant to the ACEA License Agreement, ACEA granted the Company an exclusive license and right under certain patents and certain know-how and other intellectual property (“Licensed Know-How”) to fully utilize, exploit and commercialize (i) the Licensed Know-How, (ii) Abivertinib (AC0010), a selective, orally available irreversible small molecule tyrosine kinase inhibitor to Bruton’s tyrosine kinase and mutant epidermal growth factor receptor, including any improvements thereto, and (iii) (a) any composition, product, or component part thereof, and (b) any and all services offered in connection or associated therewith, in all fields of use, including the diagnosis, treatment and/or cure of any human disease or disorder worldwide, other than the People’s Republic of China.

As consideration for the license under the ACEA License Agreement, the Company paid ACEA an up-front license fee of $15.0 million in cash, which was expensed as acquired in-process research and development during the three and nine months ended September 30, 2020. The Company also agreed to pay ACEA (i) certain milestone payments upon the receipt of certain regulatory approvals, and (ii) certain milestone payments upon the Company’s or its affiliates’ achievement of certain commercial sales milestones. The milestone payments may be comprised of cash or any combination of cash and common stock of the Company, in any case as determined by the Company so long as no more than 50% of any upfront payment or milestone payment is comprised of common stock. The Company will also pay certain royalties in the mid-single digit to low-double digit percentages of annual net sales by the Company.

License Agreement with The Trustees of Columbia University in the City of New York

In July 2020, the Company entered into an Exclusive License Agreement (the “Columbia License Agreement”) with The Trustees of Columbia University in the City of New York (“Columbia”). Pursuant to the Columbia License Agreement, Columbia granted the Company (i) an exclusive license under certain patents, other intellectual property and materials to discover, develop, commercialize and exploit certain products and services (“Products”) in all diagnostic applications of high-performance loop-mediated isothermal amplification (“HP-LAMP”) for coronaviruses and influenza viruses (the “Field”) worldwide, subject to certain limitations. Pursuant to the Columbia License Agreement, Columbia also granted to the Company an option, exercisable for twelve months from the effective date of the Columbia License Agreement and subject to the satisfaction of certain conditions, to acquire an exclusive worldwide license to such patents, other intellectual property and materials for additional diagnostic application(s) of HP-LAMP (other than for coronaviruses and influenza viruses), subject to certain limitations.

As consideration for the license under the Columbia License Agreement, the Company paid Columbia an up-front license fee of $5.0 million in cash, which was expensed as acquired in-process research and development during the three and nine months ended September 30, 2020. The Company also agreed to pay Columbia (i) an earned royalty on the net sales of Products in the Field worldwide, and (ii) minimum annual royalty payments of $1.0 million no later than ten days following the first bona fide commercial sale of a Product to a third-party customer and on an annual basis thereafter. In addition, the Company agreed to pay Columbia a percentage of certain non-royalty sublicense revenue and other payments received by the Company from its sublicensees as

consideration for the grant of any sublicense, option or similar rights. Pursuant to the Columbia License Agreement, the Company also agreed to pay certain one-time, development milestone payments to Columbia upon the receipt of certain regulatory approvals or the first commercial sale of certain Products for diagnostic applications within the Field.

License Agreement with Mayo Foundation

In September 2020, the Company entered into a patent and know-how license agreement (the “Mayo License Agreement”) with Mayo Foundation for Medical Education and Research (“Mayo”). Pursuant to the Mayo License Agreement, Mayo granted the Company a sublicensable license under certain of Mayo’s patents, know-how, and materials relating to targeted nanoparticle therapies (“Patent Rights”, “Know-How”, and “Materials”, respectively) to reproduce, use, commercialize, and exploit related products, processes and services (“Licensed Products”) for the prevention, diagnosis and/or treatment of human diseases and conditions worldwide.

As consideration for the license under the Mayo License Agreement, the Company paid Mayo an upfront license fee of $9.3 million comprised of approximately $2.3 million in cash and 996,803 shares of the Company’s common stock, and which was expensed as acquired in-process research and development during the three and nine months ended September 30, 2020. The Company also agreed to (i) reimburse Mayo up to $3.4 million for preclinical and clinical research expenses associated with the Know-How, Patent Rights and Materials arising prior to the entry into the Mayo License Agreement, and (ii) reimburse Mayo approximately $2.0 million for expenses related to the development and manufacturing of the Materials arising prior to the entry into the Mayo License Agreement. Such reimbursements were accrued for and expensed as acquired in-process research and development during the three and nine months ended September 30, 2020.

The Company also agreed to pay Mayo (i) certain milestone payments upon the initiation of certain clinical trials, (ii) certain milestone payments upon the receipt of certain regulatory approvals, and (iii) certain milestone payments upon the achievement of certain commercial sales milestones. The Company will also pay certain royalties in the low-single digit to mid-single digit percentages of annual net sales of Licensed Products by the Company and a share of any sublicense revenue received by the Company from sublicensees.

License Agreement with NantCell

In April 2015, the Company and NantCell entered into a license agreement. Under the terms of the agreement, the Company granted an exclusive license to NantCell covering patent rights, know-how and materials related to certain antibodies, ADCs and two CAR-TNK products. NantCell agreed to pay a royalty not to exceed five percent (5%) to the Company on any net sales of products (as defined) from the assets licensed by the Company to NantCell. In addition to the future royalties payable under this agreement, NantCell paid an upfront payment of $10.0 million to the Company and issued 10 million shares of NantCell common stock to the Company valued at $100.0 million based on a recent equity sale of NantCell common stock to a third party. The Company terminated the agreement, effective January 29, 2020, due to NantCell`s material breach of the agreement. The termination and remedies related to such termination are currently pending in an arbitration before the American Arbitration Association. The Company has therefore deferred recognition of the upfront payment and the value of the equity interest received until the arbitration is concluded or resolved. The Company’s ownership interest in NantCell does not provide the Company with control or the ability to exercise significant influence; therefore the $100.0 million investment is carried at cost, less impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments of NantCell.

7. Debt

2018 Purchase Agreements and Indenture for Scilex

On September 7, 2018, Scilex Pharmaceuticals Inc. (“Scilex Pharma”) entered into Purchase Agreements (the “2018 Purchase Agreements”) with certain investors (collectively, the “Scilex Note Purchasers”) and the Company. Pursuant to the 2018 Purchase Agreements, on September 7, 2018, Scilex Pharma issued and sold to the Scilex Note Purchasers senior secured notes due 2026 in an aggregate principal amount of $224.0 million (the “Scilex Notes”) for an aggregate purchase price of $140.0 million (the “Scilex Notes Offering”). In connection with the Scilex Notes Offering, Scilex Pharma also entered into an Indenture (the “Indenture”) governing the Scilex Notes with U.S. Bank National Association, a national banking association, as trustee and collateral agent, and the Company. Pursuant to the Indenture, the Company agreed to irrevocably and unconditionally guarantee, on a senior unsecured basis, the punctual performance and payment when due of all obligations of Scilex Pharma under the Indenture.

To estimate the fair value of the Scilex Notes, the Company uses the discounted cash flow method under the income approach, which involves significant Level 3 inputs and assumptions, combined with a Monte Carlo simulation as appropriate. The value of the debt instrument is based on the present value of future principal payments and the discounted rate of return reflective of the Company’s credit risk.

Borrowings of the Scilex Notes consisted of the following (in thousands):

	September 30, 2020			December 31, 2019
Principal	$	218,187		$	221,666
Unamortized debt discount		(60,131	)		(67,839	)
Unamortized debt issuance costs		(3,866	)		(4,360	)
Carrying value	$	154,190		$	149,467
Estimated fair value	$	171,100		$	150,800

Future minimum payments under the Scilex Notes, based on a percentage of projected net sales of ZTlidoare estimated as follows (in thousands):

Year Ending December 31,
2020 (Remaining three months)	$	1,315
2021		4,636
2022		5,535
2023		7,233
2024		8,830
2025		10,142
Thereafter		180,496
Total future minimum payments		218,187
Unamortized debt discount		(60,131	)
Unamortized capitalized debt issuance costs		(3,866	)
Total Scilex Notes		154,190
Current portion		(4,732	)
Long-term portion of Scilex Notes	$	149,458

The Company made principal payments of $3.5 million and $1.7 million during the nine months ended September 30, 2020 and 2019, respectively, which were based on a percentage of net sales of ZTlido. The imputed effective interest rate at September 30, 2020 was 6.5%. The amount of debt discount and debt issuance costs included in interest expense for the three months ended September 30, 2020 and 2019 was approximately $2.5 million and $3.2 million, respectively. During the nine months ended September 30, 2020 and 2019, the amount of debt discount and debt issuance costs included in interest expense was $8.2 million and $12.0 million, respectively.

The Company identified a number of embedded derivatives that require bifurcation from the Scilex Notes and that were separately accounted for in the consolidated financial statements as derivative liabilities. Certain of these embedded features include default interest provisions, contingent rate increases, contingent put options, optional and automatic acceleration provisions and tax indemnification obligations. The fair value of the derivative liabilities associated with the Scilex Notes was estimated using the discounted cash flow method under the income approach combined with a Monte Carlo simulation model. This involves significant Level 3 inputs and assumptions, including a risk adjusted net sales forecast, an effective debt yield, estimated marketing approval probabilities for SP-103 and an estimated probability of an initial public offering by Scilex Holding that satisfies certain valuation thresholds and timing considerations (See Note 3). The Company re-evaluates this assessment each reporting period.

The 2018 Purchase Agreements and Indenture, as amended, provide that, upon the occurrence of an event of default, the lenders thereunder may, by written notice to the Company, declare all of the outstanding principal and interest under the Indenture immediately due and payable. For purposes of the Indenture, an event of default includes, among other things, (i) a failure to pay any amounts when due under the Indenture, (ii) a breach or other failure to comply with the covenants (including financial, notice and reporting covenants) under the Indenture, (iii) a failure to make any payment on, or other event triggering an acceleration under, other material indebtedness of the Company, and (iv) the occurrence of certain insolvency or bankruptcy events (both voluntary and involuntary) involving the Company or certain of its subsidiaries. The Company is subject to certain customary default clauses under the Indenture and is in compliance with event of default clauses under the Indenture.

2018 Oaktree Term Loan Agreement

In November 2018, the Company entered into a Term Loan Agreement (the “Loan Agreement”) with certain funds and accounts managed by Oaktree Capital Management, L.P. (collectively, the “Lenders”) and Oaktree Fund Administration, LLC, as administrative and collateral agent, for an initial term loan of $100.0 million (the “Initial Loan”). In May 2019, the Company entered into an amendment to the Loan Agreement, under which terms the Lenders agreed to make available to the Company $20.0 million (collectively, with the Initial Loan, the “Term Loans”). During the nine months ended September 30, 2020, the Company repaid $120.0 million of outstanding principal under the Term Loans plus approximately $9.4 million of related prepayment premium, exit fees and accrued interest thereon. In connection with the repayment of outstanding principal, the Company recorded a loss on debt settlement of $51.9 million.

Interest expense recognized for stated interest on the Term Loans was $0.0 million and $0.5 million for the three months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019 the interest expense for stated interest on the Term Loans totaled $3.0 million and $1.4 million, respectively. The amount of debt discount and debt issuance costs included in interest expense on the Term Loans for the three months ended September 30, 2020 and 2019 was $0.0 million and $0.6 million, respectively. During the nine months ended September 30, 2020 and 2019, the amount of debt discount and debt issuance costs included in interest expense was $2.2 million and $1.7 million, respectively.

8. Stockholders’ Equity

Aspire Transaction

In February 2020, the Company entered into a Common Stock Purchase Agreement (the “Aspire Purchase Agreement”) with Aspire Capital Fund, LLC, (“Aspire Capital”), pursuant to which Aspire Capital was committed to purchase up to an aggregate of $75.0 million of shares of the Company’s common stock over a 24-month term. Upon execution of the Aspire Purchase Agreement, the Company issued to Aspire Capital 897,308 shares of the Company’s common stock as a commitment fee. The Company used and is using proceeds it received under the Aspire Purchase Agreement for working capital and general corporate purposes and for the repayment of the Term Loans.

During the nine months ended September 30, 2020, the Company issued and sold an aggregate of 33,825,010 shares of the Company’s common stock to Aspire Capital for aggregate net proceeds to the Company of $75.0 million. On April 24, 2020, the Aspire Purchase Agreement terminated effective immediately in accordance with its terms as the Company issued and sold, as of such date, the full $75.0 million of shares available for issuance thereunder.

Equity Distribution Agreement

On April 27, 2020, the Company voluntarily terminated the Equity Distribution Agreement, dated October 1, 2019 (the “Distribution Agreement”), that the Company entered into with JMP Securities LLC (“JMP Sales Agent”), effective immediately. Pursuant to the Distribution Agreement, the Company could offer and sell, from time to time, through the JMP Sales Agent, shares of the Company’s common stock having an aggregate offering price of up to $75,000,000. During the term of the Distribution Agreement, the Company sold an aggregate of 2,120,149 shares of its common stock thereunder for aggregate gross proceeds to the Company of approximately $7.4 million. The Distribution Agreement was terminable at will by the Company with no penalty.

Sales Agreement

On April 27, 2020, the Company entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners, as sales agent (the “Sales Agent”), pursuant to which the Company may offer and sell through or to the Sales Agent (the “Offering”) up to $250.0 million in shares of its common stock (the “Shares”). Any Shares offered and sold in the Offering will be issued pursuant to the Company’s universal shelf registration statement on Form S-3 (the “Shelf Registration Statement”) and the prospectus supplement relating to the Offering filed with the Securities and Exchange Commission (the “SEC”) on April 27, 2020. The Offering will terminate upon (a) the election of the Sales Agent upon the occurrence of certain adverse events, (b) three business days’ advance notice from one party to the other, or (c) the sale of all of the Shares. Under the terms of the Sales Agreement, the Sales Agent will be entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of shares under the Sales Agreement. During the nine months ended September 30, 2020, the Company sold an aggregate of 17,579,496 shares of its common stock pursuant to the Sales Agreement for aggregate net proceeds to the Company of approximately $122.8 million. Subsequent to September 30, 2020 and through November 6, 2020, the Company sold an aggregate of 4,596,637 shares of its common stock pursuant to the Sales Agreement for aggregate net proceeds to the Company of approximately $36.2 million.

Common Stock Purchase Agreement

On April 27, 2020, the Company entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Arnaki Ltd. (the “Purchaser”), pursuant to which the Purchaser is committed to purchase up to an aggregate of $250.0 million of shares of the Company’s common stock over the 36-month term of the Purchase Agreement on the terms set forth therein. Any Shares offered and sold to the Purchaser will be issued pursuant to the Shelf Registration Statement and the prospectus supplement relating to offering of shares pursuant to the Purchase Agreement filed with the SEC on April 27, 2020.

On any business day over the term of the Purchase Agreement (each, a “Purchase Date”), the Company has the right, in its sole discretion, to present the Purchaser with a purchase notice directing the Purchaser to purchase up to 650,000 shares of common stock per business day. The Company and the Purchaser also may mutually agree to increase the number of shares that may be sold to as much as an additional 3,600,000 shares per Purchase Date. The Company also has the right, in its sole discretion, to grant the Purchaser an option to purchase additional shares of common stock, subject to a maximum number of shares determined by the Company on each Purchase Date. The aggregate purchase price paid by the Purchaser shall not exceed $5.0 million per Purchase Date, unless mutually agreed upon by the Company and the Purchaser. The purchase price of the common stock pursuant to the Purchase Agreement will generally be equal to 97.5% of the daily volume weighted average purchase price of the common stock on the Purchase Date. During the nine months ended September 30, 2020, the Company sold an aggregate of 1,423,077 shares of its common stock pursuant to the Purchase Agreement for aggregate net proceeds of $8.0 million.

Effective October 27, 2020, the Company voluntarily terminated the Purchase Agreement. The Purchase Agreement was terminable at will by the Company with no penalty.

9. Stock Based Compensation

2019 Stock Incentive Plan

A summary of stock option activity under the Sorrento Therapeutics, Inc. 2009 Stock Incentive Plan and the Sorrento Therapeutics, Inc. 2019 Stock Incentive Plan for the nine months ended September 30, 2020 is as follows (in thousands, except price data):

	Options Outstanding			Weighted- Average Exercise Price		Aggregate Intrinsic Value
Outstanding at December 31, 2019		14,586,661		$	4.36	$	5,136
Options Granted		6,339,500		$	5.25
Options Canceled		(2,682,068	)	$	4.57
Options Exercised		(1,213,924	)	$	4.21
Outstanding at September 30, 2020		17,030,169		$	4.68	$	111,676

During the three and nine months ended September 30, 2020, the Company also granted 37,891 shares of unrestricted stock that vested on the grant date and were fully expensed in the period therein. The estimated fair value of each stock option grant was determined on the grant date using the Black-Scholes valuation model with the following weighted-average assumptions.

	Nine Months Ended September 30,
	2020			2019
Weighted-average grant date fair value	$	4.14		$	3.05
Dividend yield		—	%		—	%
Volatility		104	%		100	%
Risk-free interest rate		0.45	%		1.87	%
Expected life of options (years)	5.7			6.1

Total stock-based compensation recorded as operating expense under the Sorrento Therapeutics, Inc. 2019 Stock Incentive Plan was $5.0 million and $2.4 million for the three months ended September 30, 2020 and 2019, respectively, and $9.2 million and $6.1 million for the nine months ended September 30, 2020 and 2019, respectively. The total unrecognized compensation cost related to unvested stock option grants as of September 30, 2020 was $34.0 million and the weighted average period over which these grants are expected to vest is 2.7 years.

Scilex Holding Company

Under the Scilex Holding Company 2019 Stock Option Plan and Scilex Pharmaceuticals Inc. 2017 Equity Incentive Plan, total stock-based compensation recorded as operating expense was $1.3 million and $1.6 million for the three months ended September 30, 2020 and 2019, respectively, and $4.1 million and $2.6 million for the nine months ended September 30, 2020 and 2019, respectively. The total unrecognized compensation cost related to unvested stock option grants as of September 30, 2020 was $11.5 million and the weighted average period over which these grants are expected to vest is 2.5 years.

Employee Stock Purchase Plan

On October 16, 2020 at the Company’s 2020 Annual Meeting of Stockholders (the “Annual Meeting”), the Company’s stockholders approved the Company’s 2020 Employee Stock Purchase Plan (“ESPP”). Under the terms of the ESPP, the Company’s employees can elect to have up to 15% of their annual compensation, up to a maximum of $25,000 per year, withheld to purchase shares of the Company’s common stock for a purchase price equal to 85% of the lesser of the fair market value per share (at closing) of the Company’s common stock on (i) the commencement date of the six-month offering period, or (ii) the respective purchase date. The initial offering period will commence on November 6^thand end on May 5^th, with subsequent offering periods commencing on May 6^th of each year and ending on November 5^th of the following year.

CEO Performance Award

On August 7, 2020, the Compensation Committee of the Company`s Board of Directors (the “Compensation Committee”) approved a grant to Henry Ji, Ph.D., the Company’s Chairman of the Board, Chief Executive Officer and President, of a 10-year CEO performance award tied solely to achieving market capitalization milestones (the “CEO Performance Award”), subject to approval of the Company’s stockholders at the Annual Meeting. The CEO Performance Award consists of a 10-year option to purchase an aggregate of 24,935,882 shares of the Company’s common stock, which was equal to 10% of the Company’s outstanding shares of common stock on the day prior to the date of grant, and vests in ten tranches. Each of the ten tranches vests only if a market capitalization milestone is met. To meet the first market capitalization milestone, the Company’s current market capitalization must increase to $5.0 billion. For the next two milestones, the Company’s market capitalization must continue to increase in additional $2.0 billion increments. For the three milestones thereafter, the Company’s market capitalization must increase in additional $3.0 billion increments. For the next three milestones thereafter, the Company’s market capitalization must increase in additional $4.0 billion increments. For the final milestone, the Company’s market capitalization must increase by an additional $5.0 billion. Thus, for Dr. Ji to fully vest in the award, the Company’s market capitalization must increase to $35.0 billion. The exercise price per share subject to the CEO Performance Award is $17.30, which is a 20% premium to the closing sales price of the Company’s common stock on August 7, 2020, the date the CEO Performance Award was approved by the Compensation Committee. The CEO Performance Award was approved by the Company`s stockholders at the Annual Meeting held on October 16, 2020, which represents the date of grant for accounting purposes.

10. Commitments and Contingencies

Litigation

In the normal course of business, the Company may be named as a defendant in one or more lawsuits. Other than as set forth below, the Company is not a party to any outstanding material litigation and management is currently not aware of any legal proceedings that, individually or in the aggregate, are deemed to be material to the Company’s financial condition or results of operations.

On April 3, 2019, the Company filed two legal actions against, among others, Patrick Soon-Shiong and entities controlled by him, asserting claims for, among other things, fraud and breach of contract, arising out of Dr. Soon-Shiong’s purchase of the drug Cynviloq™ from the Company in May 2015. The actions allege that Dr. Soon-Shiong and the other defendants, among other things, acquired the drug Cynviloq™ for the purpose of halting its progression to the market. Specifically, the Company has filed:

•

An arbitration demand with the American Arbitration Association in Los Angeles, California against NantPharma, LLC and Chief Executive Officer Patrick Soon-Shiong, related to alleged fraud and breaches of the Stock Sale and Purchase Agreement, dated May 14, 2015, entered into between NantPharma, LLC and the Company, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed with SEC on August 7, 2015. On May 24, 2019, NantCell, Inc., Dr. Soon-Shiong and Immunotherapy NANTibody LLC (“NANTibody”) General Counsel Charles Kim filed a motion in the Los Angeles Superior Court to stay or dismiss the Company’s arbitration demand. On October 9, 2019, the Los Angeles Superior Court denied the motion to stay or dismiss the arbitration demand, and the arbitration is ongoing against NantPharma. On March 5, 2020, the Company filed a legal action against Dr. Soon-Shiong in Los Angeles Superior Court, asserting claims for fraudulent inducement and common law fraud, arising out of Dr. Soon-Shiong’s purchase of the drug Cynviloq™ from the Company in May 2015. The action alleges that, among other things, Dr. Soon-Shiong acquired the drug Cynviloq for the purpose of halting its progression to the market. In connection with filing this civil

action in the Los Angeles Superior Court, where the Company will have the right to a jury trial against Dr. Soon-Shiong, the Company has dismissed Dr. Soon-Shiong from the related, ongoing arbitration against NantPharma, LLC; and

•

An action in the Los Angeles Superior Court derivatively on behalf of NANTibody against NantCell, Inc., NANTibody Board Member and NantCell, Inc. Chief Executive Officer Patrick Soon-Shiong, and NANTibody officer Charles Kim, related to several breaches of the June 11, 2015 Limited Liability Company Agreement for NANTibody entered into between the Company and NantCell, Inc. The suit also alleges breaches of fiduciary duties and seeks, inter alia, a declaration that the Assignment Agreement entered into on July 2, 2017, between NantPharma, LLC and NANTibody is void and an equitable unwinding of the Assignment Agreement. The suit calls for the restoration of $90.05 million to the NANTibody capital account, thereby restoring the Company’s equity method investment in NANTibody to its invested amount as of June 30, 2017 of $40.0 million. On May 24, 2019, NantCell, Inc. and Dr. Soon-Shiong filed a cross-complaint against the Company and Dr. Ji, seeking unspecified damages, as well as additional punitive damages and specific performance, related to alleged fraud, alleged breaches of the Exclusive License Agreement for certain antibodies (dated June 11, 2015 and entered into between NANTibody, LLC and the Company), and tortious interference with contract. On May 24, 2019, NANTibody and NantPharma, LLC filed a new complaint in the action against the Company and Dr. Ji, seeking unspecified damages, as well as additional punitive damages and specific performance, related to alleged fraud, alleged breaches of the Stock Sale and Purchase Agreement, alleged breaches of the Exclusive License Agreement for certain antibodies (dated April 21, 2015 and entered into between NantCell, Inc. and the Company), and tortious interference with contract. On July 8, 2019, the Company and Dr. Ji filed motions to compel the cross-complaint and new action to arbitration. On October 9, 2019, the Los Angeles Superior Court granted the motions to compel to arbitration all of the claims brought by NANTibody, NantCell, Inc. and NantPharma, LLC, and denied the motions to compel as to the claims brought by Dr. Soon-Shiong. Subsequently, NANTibody, NantCell, Inc., and NantPharma, LLC have re-filed their claims in arbitration with the American Arbitration Association. On May 4, 2020, the Company filed counterclaims against NANTibody and NantPharma related to breaches of the April 21, 2015 and June 11, 2015 Exclusive License Agreements. With the counterclaims, the Company is seeking money damages in an amount yet to be determined. The claims against Dr. Soon-Shiong have been stayed pending resolution of the claims filed in arbitration. The original derivative action is no longer stayed, and the parties are currently engaged in discovery in the suit.

On May 26, 2020, Wasa Medical Holdings filed a putative federal securities class action in the U.S. District Court for the Southern District of California, Case No. 3:20-cv-00966-AJB-DEB, against the Company, its President, Chief Executive Officer and Chairman of the Board of Directors, Henry Ji, Ph.D., and its SVP of Regulatory Affairs, Mark R. Brunswick, Ph.D. The action alleges that the Company, Dr. Ji and Dr. Brunswick made materially false and/or misleading statements to the investing public by publicly issuing false and/or misleading statements regarding STI-1499 and its ability to inhibit the SARS-CoV-2 virus infection and that such statements violated Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The suit seeks to recover damages caused by the alleged violations of federal securities laws, along with the plaintiffs’ reasonable costs and expenses incurred in the lawsuit, including counsel fees and expert fees. On June 11, 2020, Jeannette Calvo filed a second putative federal securities class action in the U.S. District Court for the Southern District of California, Case No. 3:20-cv-01066-JAH-WVG, against the same defendants alleging the same claims and seeking the same relief. It is anticipated that these cases will be consolidated as part of the lead plaintiff and counsel appointment process under the Private Securities Litigation Reform Act. The Company is defending these matters vigorously.

Operating Leases

As of September 30, 2020, the Company’s leases have remaining lease terms of approximately 0.2 to 9.2 years, some of which include options to extend the lease terms for up to five years, and some of which allow for early termination. Short-term operating lease costs were immaterial.

Supplemental quantitative information related to leases includes the following (in thousands, except for years and percentages):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Operating cash flows used for operating leases	$	2,531		$	1,712		$	7,354		$	5,057
ROU assets obtained in exchange for new and amended operating lease liabilities	$	1,083		$	2,030		$	1,878		$	6,777
Operating lease expense	$	2,580		$	2,554		$	7,550		$	7,416
Weighted average remaining lease term in years	8.6			9.5			8.6			9.5
Weighted average discount rate		12.2	%		12.2	%		12.2	%		12.2	%

Maturities of lease liabilities were as follows (in thousands):

Years ending December 31,	Operating leases
2020 (Remaining three months)	$	2,576
2021		9,985
2022		10,047
2023		10,285
2024		10,418
2025		9,757
Thereafter		43,174
Total lease payments		96,242
Less imputed interest		(41,319	)
Total lease liabilities as of September 30, 2020	$	54,923

11. 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 temporary differences. In assessing the Company’s ability to realize deferred tax assets, management considers, on a periodic basis, whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. As such, management has determined that it is appropriate to maintain a valuation allowance against the Company’s U.S. federal and state deferred tax assets, with the exception of an amount equal to schedulable deferred tax liabilities.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits net operating loss carryforwards generated in taxable years beginning after December 31, 2017, to offset 100% of taxable income for taxable years beginning before January 1, 2021, and 80% of taxable income in taxable years beginning after December 31, 2020. In addition, the CARES Act makes the Alternative Minimum Tax Credit 100% refundable for taxable years beginning in 2018 and 2019. The Company has recorded an income tax benefit of $0.1 million related to this legislation.

The Company’s income tax benefit of $2.1 million and $0.8 million reflect effective tax rates of 0.9% and 0.27% for the nine months ended September 30, 2020 and 2019, respectively. The Company’s income tax expense of $0.1 million and income tax benefit of $0.2 million reflect effective tax rates of 0.1% and 0.30% for the three months ended September 30, 2020 and 2019, respectively.

The difference between the expected statutory federal tax rate of 21% and the 0.9% effective tax rate for the nine months ended September 30, 2020 was primarily attributable to the valuation allowance against most of the Company’s deferred tax assets. For the nine months ended September 30, 2020, when compared to the same period in 2019, the increase in the tax benefit and change in effective income tax rate was primarily attributable to the impact of the Company’s valuation allowance.

The Company is subject to taxation in the U.S. and various state and foreign jurisdictions. The Company’s tax years for 2007 forward are subject to examination by the U.S. and state tax authorities due to the existence of the net operating loss and research credit carryforwards.

12. Related Party Agreements

As of September 30, 2020, approximately 14.7% of the outstanding capital stock of Scilex Holding represents a portion of noncontrolling interest and continues to be held by ITOCHU CHEMICAL FRONTIER Corporation. Scilex Pharma has entered into a product development agreement with ITOCHU CHEMICAL FRONTIER Corporation, which serves as the sole manufacturer and supplier to Scilex Pharma for the ZTlidoproduct. Scilex Pharma purchased approximately $0.7 million of inventory from ITOCHU CHEMICAL FRONTIER Corporation during the nine months ended September 30, 2020.

13. Loss Per Share

For the three and nine months ended September 30, 2020 and 2019, basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted earnings per share of common stock is calculated to give effect to all dilutive securities, using the treasury stock method and the if-converted method for potentially dilutive shares of common stock issuable upon the Semnur Share Exchange.

The following table sets forth the reconciliation of basic and diluted loss per share for the three and nine months ended September 30, 2020 and 2019 (in thousands except per share amounts):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Numerator
Net loss attributable to Sorrento	$	(84,023	)	$	(64,415	)	$	(226,959	)	$	(229,248	)
Net loss attributable to Semnur holders of Scilex Holding		(1,868	)		(6,205	)		(8,524	)		(34,819	)
Net loss used for diluted earnings per share	$	(85,891	)	$	(70,620	)	$	(235,483	)	$	(264,067	)

Denominator for Basic Loss Per Share		251,211			130,800			217,050			125,240
Potentially dilutive shares of Sorrento common stock issuable upon Semnur Share Exchange		6,459			9,645			6,459			7,025
Denominator for Diluted Loss Per Share		257,670			140,445			223,509			132,265
Basic Loss Per Share	$	(0.33	)	$	(0.49	)	$	(1.05	)	$	(1.83	)
Diluted Loss Per Share	$	(0.33	)	$	(0.50	)	$	(1.05	)	$	(2.00	)

The potentially dilutive stock options that would have been excluded because the effect would have been anti-dilutive for the nine months ended September 30, 2020 and 2019 were 9.3 million and 9.7 million, respectively. The potentially dilutive warrants that would have been excluded because the effect would have been anti-dilutive for the nine months ended September 30, 2020 and 2019 were 18.6 million and 47.8 million, respectively.

14. Segment Information

The Company operates in two operating and reportable segments, Sorrento Therapeutics and Scilex. With the exception of unrestricted cash balances, the Company’s Chief Operating Decision Maker does not regularly review asset information by reportable segment and, therefore, it does not report asset information by reportable segment. The majority of long-lived assets for both segments are located in the United States.

The following table presents information about the Company’s reportable segments for the three and nine months ended September 30, 2020 and 2019 (in thousands):

	Three Months Ended September 30,
	2020									2019
	Sorrento Therapeutics			Scilex			Total			Sorrento Therapeutics			Scilex			Total
External revenues	$	3,927		$	7,826		$	11,753		$	2,007		$	3,771		$	5,778
Operating expenses		82,868			11,989			94,857			34,480			24,581			59,061
Operating loss		(78,941	)		(4,163	)		(83,104	)		(32,473	)		(20,810	)		(53,283	)
Unrestricted cash		71,004			4,172			75,176			20,860			13,789			34,649

	Nine Months Ended September 30,
	2020									2019
	Sorrento Therapeutics			Scilex			Total			Sorrento Therapeutics			Scilex			Total
External revenues	$	9,694		$	18,787		$	28,481		$	7,109		$	11,289		$	18,398
Operating expenses		157,559			44,917			202,476			105,912			139,300		$	245,212
Operating loss		(147,865	)		(26,130	)		(173,995	)		(98,803	)		(128,011	)		(226,814	)
Unrestricted cash		71,004			4,172			75,176			20,860			13,789			34,649

15. Subsequent Events

License Agreement with Personalized Stem Cells, Inc.

On October 12, 2020, the Company entered into a license agreement (the “License Agreement”) with Personalized Stem Cells, Inc. (“PSC”). Pursuant to the License Agreement, PSC granted the Company an exclusive license and right under certain patents, certain know-how and other intellectual property to fully utilize, exploit and commercialize certain products and services using allogeneic adipose-derived stem cells for or in respect of human health, including the diagnosis and treatment and/or cure of any human disease or disorder (excluding commercial sales for the diagnosis, treatment and/or cure of SARS-CoV-2 or other respiratory diseases in the People’s Republic of China) worldwide (excluding the People’s Republic of China for products directed at COVID-19 or other respiratory diseases). PSC also agreed to transfer certain cell lines composed of stromal vascular cells, master cell banks and finished final drug lots (the “Product Materials”) to the Company. The Company agreed to grant PSC rights to use data derived by the Company from a certain Phase I COVID-19 study for PSC’s own programs that are not competitive with the businesses or activities of the Company, and for PSC to sublicense such data to third parties for research, development and regulatory purposes.

As consideration for the license under the License Agreement, the Company has agreed to pay PSC an upfront license fee of $3.5 million in cash. The Company also agreed to pay PSC (i) a milestone payment upon the issuance of a regulatory approval, and (ii) certain milestone payments upon PSC’s manufacture and delivery of the Product Materials to the Company. The Company will also pay royalties in the low-single digit percentages of annual net sales of licensed products and services by the Company and a share of any sublicense revenue received by the Company from sublicensees.

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” 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 “assumes,” “plans,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” 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 (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

Sorrento Therapeutics, Inc., together with its subsidiaries (collectively, the “Company”, “we”, “us”, and “our”) is a clinical stage and commercial biopharmaceutical company focused on delivering innovative and clinically meaningful therapies to address unmet medical needs.

At our core, we are antibody-centric and leverage our proprietary G-MAB™ library and targeted delivery modalities to generate the next generation of cancer therapeutics. Our fully human antibodies include PD-1, PD-L1, CD38, CD123, CD47, CTLA-4, c-MET, VEGFR2, CCR2 and CD137 among others. We also have programs assessing the use of our technologies and products in autoimmune, inflammatory, viral and neurodegenerative diseases.

Our vision is to leverage these antibodies in conjunction with proprietary targeted delivery modalities to generate the next generation of cancer therapeutics. These modalities include proprietary chimeric antigen receptor T-cell therapy (“CAR-T”), dimeric antigen receptor T-cell therapy (“DAR-T”), antibody drug conjugates (“ADCs”) as well as bispecific antibody approaches. We acquired Sofusa^®, a revolutionary drug delivery technology, in July 2018, which delivers biologics directly into the lymphatic system to potentially achieve improved efficacy and fewer adverse effects than standard parenteral immunotherapy. Additionally, our majority-owned subsidiary, Scilex Holding Company (“Scilex Holding”), acquired the assets of Semnur Pharmaceuticals, Inc. (“Semnur”) in March 2019. Semnur’s SEMDEXA^TM (“SP-102”) compound has the potential to become the first Food and Drug Administration (the “FDA“)-approved epidural steroid product for the treatment of sciatica. In response to the global COVID-19 pandemic we are utilizing the Bruton’s tyrosine kinase (“BTK”) inhibitor (in-licensed from ACEA Therapeutics) in a U.S. Phase II study of cytokine storm associated with COVID-19 infection and a Phase II trial in Brazil in mild, moderate and severe COVID-19 patients, and we are also internally developing potential coronavirus antiviral therapies and vaccines, including ACE-MAB^TM, COVIDTRAP^TM, COVI-MAB^TM, COVI-GUARD^TM, COVI- SHIELD^TM, COVI-AMG™ and T-VIVA-19^TM; and diagnostic test solutions, including COVI-TRACK™, COVI-STIX™ and COVI-TRACE™.

With each of our clinical and pre-clinical programs, we aim to tailor our therapies to treat specific stages in the evolution of disease, from elimination, to equilibrium and escape. In addition, our objective is to focus on tumors that are resistant to current treatments and where we can design focused trials based on a genetic signature or biomarker to ensure patients have the best chance of a durable and significant response. We have several immuno-oncology programs that are in or near to entering the clinic. These include cellular therapies, oncolytic viruses (Seprehvec^TM) and a palliative care program targeted to treat intractable cancer pain. Our cellular therapy programs focus on CAR-T and DAR-T for adoptive cellular immunotherapy to treat both solid and liquid tumors.

Given the SARS-CoV-2 (COVID-19) pandemic, we have been cleared by the FDA to begin enrollment in a Phase Ib/IIa study of patients with moderate COVID-19 using our STII-1499 (COVI-GUARD^TM) fully human neutralizing mAb, a U.S. Phase II study of Abivertinib, an oral next generation dual EGFR/BTK inhibitor, to treat severe COVID-19 in ICU patients and a Phase II trial in Brazil in mild, moderate and severe COVID-19 patients. We are also working with Brazilian regulators (ANVISA) to conduct a COVID-19 study with COVI-GUARD^TM.

We have reported early data from Phase I trials of our carcinoembryonic antigen (“CEA”)-directed CAR-T program. We have treated five patients with stage 4, unresectable adenocarcinoma (four with pancreatic and one with colorectal cancer) and CEA-positive liver metastases with anti-CEA CAR-T. We successfully submitted an Investigational New Drug application (“IND”) for anti-CD38 CAR-T for the treatment of refractory or relapsed multiple myeloma (“RRMM”), obtained clearance from the FDA and commenced a human clinical trial for this indication in early 2018. We have dosed eleven patients. We intend to close this study to further enrollment and start up a similar anti-CD38 CAR-T construct without the myc-tag, which is believed to be safer, and intend to continue treating RRMM patients in a Phase Ib/IIa study which will begin enrollment in the fourth quarter of 2020. We intend to file INDs for our CD47 mAb and the first of our DAR-T platform products in the fourth quarter of 2020, as well.

Broadly speaking, we believe we are one of the world’s leading CAR-T and DAR-T companies today due to our investments in technology and infrastructure, which have enabled significant progress in developing our next-generation non-viral, “off-the-shelf” allogeneic DAR-T solutions. With “off-the-shelf” solutions, DAR-T therapy can truly become a drug product platform rather than a treatment procedure.

With respect to our ADC program, our CD38 ADC for systemic AL amyloidosis will begin enrolling in October 2020 in a Phase Ib ascending dose study. Based upon our recently announced exclusive license from Mayo Clinic for its antibody-drug-nanoparticle albumin-bound immune complex (ADNIC) platform, the next generation in ADC technology, we intend to file several INDs based upon this platform to treat various cancer targets.

Outside of immuno-oncology programs, as part of our global aim to provide a wide range of therapeutic products to meet underserved markets, we have made investments in non-opioid pain management. These include resiniferatoxin (“RTX”), which is a non-opioid-based toxin that specifically targets TRPV1 (transient receptor potential vanilloid-1) which, depending on the site of injection, can ablate nerves expressing TRPV1 or temporarily defunctionalize them. TRPV1 is responsible for the noxious chronic and inflammatory pain signaling that occurs post injury/trauma, but leaves other nerve functions intact. RTX has been granted orphan drug status for the treatment of intractable pain with end-stage cancer and two Phase Ib trials (intrathecal and epidural routes) in that indication have or will soon be completed. A Phase Ib trial studying tolerance and efficacy of RTX for the control of moderate to severe osteoarthritis knee pain was initiated in late 2018 and intermediate results have shown efficacy with no dose limiting toxicities. The osteoarthritis trial enrolled the last patient in the first quarter of 2020 and we expect to release the final safety clinical data by the middle of 2021. Knee arthritis registrational trials are planned to start after completion of required preclinical studies.

Also, in this area, we have developed in-house and acquired proprietary technologies to responsibly develop next generation, branded pharmaceutical products to better manage patients’ medical conditions, maximize the quality of life of patients and enable healthcare providers. The flagship product of our majority-owned subsidiary, Scilex Pharmaceuticals Inc. (“Scilex Pharma”), ZTlido® (lidocaine topical system 1.8%) (“ZTlido”), is a next-generation lidocaine delivery system which was approved by the FDA for the treatment of postherpetic neuralgia, a severe neuropathic pain condition, in February 2018, and was commercially launched in October 2018. Scilex Pharma has now built a full commercial organization, which includes sales, marketing, market access and medical affairs. ZTlido has demonstrated superior adhesion in comparative head-to-head studies as compared to Lidoderm and is manufactured by our Japanese partner in their state-of-the-art manufacturing facility.

Additionally, we are currently conducting preclinical development of multiple therapeutic, vaccine and diagnostic candidates for the potential treatment, prevention and detection of COVID-19 across our proprietary platforms, including natural killer cell therapies, neutralizing antibodies (COVI-GUARD^TM and COVI-SHIELD^TM) and soluble recombinant fusion protein traps (COVIDTRAP^TM) to potentially inhibit the binding of SARS-CoV-2’s spike protein with host ACE2 receptors, thereby potentially preventing viral cell entry. We are also developing COVID-19 diagnostic products, including COVI-TRACK^TM, for detecting the presence of antibodies against SARS-CoV-2 in patient blood samples, and COVI-TRACE^TM, for detecting the presence of SARS-CoV-2 in patient saliva samples. SARS-CoV-2 is the virus that causes COVID-19.

Impact of COVID-19 on Our Business

We are closely monitoring the COVID-19 pandemic and its potential impact on our business. We are an Essential Critical Infrastructure Provider, as our operations are critical to the continued operations of the healthcare infrastructure of the United States, as set forth by the U.S. Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency. In an effort to protect the health and safety of our employees, we took proactive action from the earliest signs of the outbreak including implementing social distancing policies at our facilities, facilitating remote working arrangements and imposing employee travel restrictions.

The COVID-19 pandemic has created uncertainties in the expected timelines for clinical stage biopharmaceutical companies such as ours, including possible delays in clinical trials and disruptions in the supply chain for raw materials used in clinical trial work. Such delays could materially impact our business in future periods. Furthermore, the spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain. Accordingly, the extent to which the COVID-19 global pandemic impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, U.S. and foreign government actions to respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume. For more information on the risks associated with COVID-19, refer to Part II, Item 1A, “Risk Factors” herein.

Results of Operations

Comparison of the Three Months Ended September 30, 2020 and 2019

Revenues. Revenues were $11.8 million for the three months ended September 30, 2020, as compared to $5.8 million for the three months ended September 30, 2019.

Revenues in our Sorrento Therapeutics segment increased from $2.0 million to $3.9 million for the three months ended September 30, 2020 compared to the same quarter of the prior year and were primarily attributed to higher contract manufacturing service revenues.

Revenues in our Scilex segment increased from $3.8 million to $7.8 million for the three months ended September 30, 2020 compared to the same quarter of the prior year and were attributed to increased product sales of ZTlido.

Cost of revenues. Cost of revenues for the three months ended September 30, 2020 and 2019 were $2.7 million and $5.2 million, respectively, and relate to product sales, the sale of customized reagents and providing contract manufacturing services. The costs generally include employee-related expenses, including salary and benefits, direct materials and overhead costs including rent, depreciation, utilities, facility maintenance and insurance.

Cost of revenues for our Sorrento Therapeutics segment decreased by $0.3 million and was primarily attributable to process efficiencies realized during 2020.

Cost of revenues for our Scilex segment decreased by $2.3 million and was attributed to a shift to more favorable selling arrangements for ZTlido.

Research and Development (“R&D”) Expenses. Research and development expenses for the three months ended September 30, 2020 and 2019 were $32.0 million and $27.6 million, respectively. Research and development expenses primarily include expenses associated with isolating and advancing human antibody drug candidates derived from our libraries, as well as advancing our RTX, COVID-19, SP-102, Oncolytic Virus and ADC programs. Such expenses consist primarily of salaries and personnel-related expenses, stock-based compensation expense, clinical development expenses, preclinical testing, lab supplies, consulting costs, depreciation, and other expenses.

R&D expenses for our Sorrento Therapeutics segment increased by $6.3 million as compared to the same quarter of the prior year and were primarily driven by increased clinical development costs across our R&D platforms.

R&D expenses for our Scilex segment decreased by $1.9 million as compared to the same quarter of the prior year and were primarily driven by costs associated with our SP-102 product pipeline.

Acquired In-process Research and Development Expenses. Acquired in-process research and development expenses during the three months ended September 30, 2020 totaled $34.8 million. These expenses primarily related to various licensing arrangements entered into during the period. We did not have acquired in-process research and development expenses during the three months ended September 30, 2019.

Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses for the three months ended September 30, 2020 and 2019 were $24.3 million and $25.2 million, respectively, and consisted primarily of salaries and personnel-related expenses, stock-based compensation expense, professional fees, infrastructure expenses, legal and other general corporate expenses.

SG&A expenses for our Sorrento Therapeutics segment increased by approximately $7.4 million and were primarily attributed to increased legal fees, professional fees and stock-based compensation expense compared to the same quarter of the prior year.

SG&A expenses for our Scilex segment decreased by approximately $8.4 million and were primarily attributed to cost savings resulting from a shift to more favorable marketing programs for ZTlido and optimizing the sales force.

Loss on Derivative Liabilities. Loss on derivative liabilities for the three months ended September 30, 2020 was $1.0 million compared to a loss of $10.7 million in the same quarter in 2019.

Loss on derivative liabilities for our Sorrento Therapeutics segment totaled $0.5 million and was primarily attributed to the senior secured notes due 2026 issued by Scilex Pharma in an aggregate principal amount of $224.0 million (the “Scilex Notes”), pursuant to which the holders of the Scilex Notes could require us to repurchase Scilex Notes in certain circumstances.

Loss on derivative liabilities for our Scilex segment was $0.5 million and was primarily attributed to revised probabilities and revised sales forecasts as further described in Note 3 of the accompanying notes to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Interest Expense. Interest expense for the three months ended September 30, 2020 and 2019 was $2.6 million and $9.5 million, respectively. The decrease resulted primarily from a decrease in interest expense associated with the Term Loans.

Income Tax Expense (Benefit). Income tax expense and income tax benefit for the three months ended September 30, 2020 and 2019 was $0.1 million and $0.2 million, respectively. The increase in income tax expense was attributed to an increase in current year earnings in one of our subsidiaries.

Net Loss. Net loss for the three months ended September 30, 2020 and 2019 was $87.1 million and $75.2 million, respectively.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Revenues. Revenues were $28.5 million for the nine months ended September 30, 2020, as compared to $18.4 million for the nine months ended September 30, 2019.

Revenues in our Sorrento Therapeutics segment increased from $7.1 million to $9.7 million for the nine months ended September 30, 2020, compared to the same period of the prior year and were primarily attributed to higher contract manufacturing service revenues.

Revenues in our Scilex segment increased from $11.3 million to $18.8 million for the nine months ended September 30, 2020 compared to the same period of the prior year and were attributed to increased product sales of ZTlido.

Cost of revenues. Cost of revenues for the nine months ended September 30, 2020 and 2019 were $7.4 million and $10.8 million, respectively, and relate to product sales, the sale of customized reagents and providing contract manufacturing services. The costs generally include employee-related expenses including salary and benefits, direct materials and overhead costs including rent, depreciation, utilities, facility maintenance and insurance.

Cost of revenues for our Sorrento Therapeutics segment decreased by $1.5 million and was primarily attributable to process efficiencies realized during 2020.

Cost of revenues for our Scilex segment decreased by $1.9 million as compared to the same period of the prior year and was attributed to a shift to more favorable selling arrangements for ZTlido.

Research and Development Expenses. Research and development expenses for the nine months ended September 30, 2020 and 2019 were $77.3 million and $78.0 million, respectively. Research and development expenses primarily include expenses associated with isolating and advancing human antibody drug candidates derived from our libraries, as well as advancing our RTX, COVID-19, SP-102, Oncolytic Virus and ADC programs. Such expenses consist primarily of salaries and personnel-related expenses, stock-based compensation expense, clinical development expenses, preclinical testing, lab supplies, consulting costs, depreciation and other expenses.

R&D expenses for our Sorrento Therapeutics segment decreased by $0.5 million as compared to the same period of the prior fiscal year and were primarily driven by reduced expenditures on lab supplies and lower pre-clinical spending in the first half of 2020. The reduction in spending that occurred in early 2020 was offset by increased clinical development spending across our R&D platforms in the third quarter of 2020.

R&D expenses for our Scilex segment decreased by $0.2 million as compared to the same period of the prior fiscal year and were primarily driven by costs associated with our SP-102 product pipeline.

Acquired In-process Research and Development Expenses. Acquired in-process research and development expenses for the nine months ended September 30, 2020 totaled $39.7 million. These expenses primarily related to various licensing arrangements entered into during the period, as well as other investments in new technologies and preclinical programs. Acquired in-process research and development expenses for the nine months ended September 30, 2019 totaled $75.3 million and were associated with the acquisition of Semnur in March 2019.

Selling, General and Administrative Expenses. SG&A expenses for the nine months ended September 30, 2020 and 2019 were $75.0 million and $78.1 million, respectively, and consisted primarily of salaries and personnel-related expenses, stock-based compensation expense, professional fees, infrastructure expenses, legal and other general corporate expenses.

SG&A expenses for our Sorrento Therapeutics segment increased by approximately $13.9 million and were primarily attributed to increased legal fees, professional fees and stock-based compensation expense compared to the same period of the prior year.

SG&A expenses for our Scilex segment decreased by approximately $17.0 million and were primarily attributed to cost savings resulting from a shift to more favorable marketing programs for ZTlido and optimizing the sales force.

Gain on Derivative Liabilities. Gain on derivative liabilities for the nine months ended September 30, 2020 was $5.9 million compared to a loss of $35.8 million in the same period in 2019.

Gain on derivative liabilities for our Sorrento Therapeutics segment totaled $5.4 million and was primarily attributed to the full repayment of the Term Loans as of September 30, 2020.

Gain on derivative liabilities for our Scilex segment was $0.5 million and was primarily attributed to revised probabilities and revised sales forecasts as further described in Note 3 of the accompanying notes to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Loss on Debt Extinguishment. Loss on debt extinguishment for the nine months ended September 30, 2020 was $51.9 million and was attributed to the repayments of outstanding principal on the Term Loans as further described in Note 7 of the accompanying notes to the consolidated financial statements in Part I, Item 1 of this Form 10-Q.

Interest Expense. Interest expense for the nine months ended September 30, 2020 and 2019 was $17.7 million and $28.1 million, respectively. The decrease resulted primarily from a decrease in interest expense associated with the Term Loans.

Income Tax Benefit. Income tax benefit for the nine months ended September 30, 2020 and 2019 was $2.1 million and $0.8 million, respectively. The increase in income tax benefit was attributed to the impact of our valuation allowance.

Net Loss. Net loss for the nine months ended September 30, 2020 and 2019 was $241.3 million and $293.6 million, respectively.

Liquidity and Capital Resources

As of September 30, 2020, we had $75.2 million in cash and cash equivalents attributable in part to the following financing arrangements:

Debt Financings

2018 Oaktree Term Loan Agreement

In November 2018, we entered into a Term Loan Agreement (the “Loan Agreement”) with certain funds and accounts managed by Oaktree Capital Management, L.P. (collectively, the “Lenders”) and Oaktree Fund Administration, LLC, as administrative and collateral agent, for an initial term loan of $100.0 million (the “Initial Loan”). In May 2019, we entered into an amendment to the Loan Agreement, under which terms the Lenders agreed to make available to us $20.0 million (collectively, with the Initial Loan, the “Term Loans”). During the nine months ended September 30, 2020, we repaid $120.0 million of the outstanding principal under the Term Loans plus approximately $9.4 million of related prepayment premium, exit fees and accrued interest thereon.

Scilex Notes

Scilex Pharmaceuticals Inc. (“Scilex Pharma”) entered into purchase agreements (the “2018 Purchase Agreements”) with certain investors (collectively, the “Scilex Note Purchasers”) and us. Pursuant to the 2018 Purchase Agreements, on September 7, 2018, Scilex Pharma issued and sold to the Scilex Note Purchasers senior secured notes due 2026 in an aggregate principal amount of $224.0 million (the “Scilex Notes”) for an aggregate purchase price of $140.0 million (the “Scilex Notes Offering”). In connection with the Scilex Notes Offering, Scilex Pharma also entered into an Indenture (the “Indenture”) governing the Scilex Notes with U.S. Bank National Association, a national banking association, as trustee and collateral agent, and us. Pursuant to the Indenture, we agreed to irrevocably and unconditionally guarantee, on a senior unsecured basis, the punctual performance and payment when due of all obligations of Scilex Pharma under the Indenture.

We identified a number of embedded derivatives that require bifurcation from the Scilex Notes and were separately accounted for in the consolidated financial statements as derivative liabilities. Certain of these embedded features include default interest provisions, contingent rate increases, contingent put options, optional and automatic acceleration provisions and tax indemnification

obligations. The fair value of the derivative liabilities associated with the Scilex Notes was estimated using the discounted cash flow method under the income approach combined with a Monte Carlo simulation model. This involves significant Level 3 inputs and assumptions, including a risk adjusted net sales forecast, an effective debt yield, estimated marketing approval probabilities for SP-103 and an estimated probability of an initial public offering by Scilex Holding that satisfies certain valuation thresholds and timing considerations (See Note 3 of the accompanying notes to the consolidated financial statements in Part I, Item 1 of this Form 10-Q). We re-evaluate this assessment each reporting period.

The 2018 Purchase Agreements and Indenture for Scilex provide that, upon the occurrence of an event of default, the lenders thereunder may, by written notice to us, declare all of the outstanding principal and interest under the Indenture immediately due and payable. For purposes of the Indenture, an event of default includes, among other things, (i) a failure to pay any amounts when due under the Indenture, (ii) a breach or other failure to comply with the covenants (including financial, notice and reporting covenants) under the Indenture, (iii) a failure to make any payment on, or other event triggering an acceleration under, other material indebtedness of us, and (iv) the occurrence of certain insolvency or bankruptcy events (both voluntary and involuntary) involving us or certain of our subsidiaries. We are subject to certain customary default clauses under the Indenture and are in compliance with the event of default clauses under the Indenture.

Equity Financings

Universal Shelf Registration Statement

In March 2020, we filed a universal shelf registration statement on Form S-3 (the “Shelf Registration Statement”) with the SEC, which was declared effective by the SEC on March 20, 2020. The Shelf Registration Statement provides us with the ability to offer up to $1.0 billion of securities, including equity and other securities as described in the registration statement. Pursuant to the Shelf Registration Statement, we may offer such securities from time to time and through one or more methods of distribution, subject to market conditions and our capital needs. Specific terms and prices will be determined at the time of each offering under a separate prospectus supplement, which will be filed with the SEC at the time of any offering. As of May 7, 2020, approximately $500.0 million of securities remain available and unallocated for offerings of securities under the Shelf Registration Statement.

Common Stock Purchase Agreement

On April 27, 2020, we entered into a Common Stock Purchase Agreement (the “Purchase Agreement”) with Arnaki Ltd. (the “Purchaser”), pursuant to which the Purchaser is committed to purchase up to an aggregate of $250.0 million of shares of our common stock over the 36-month term of the Purchase Agreement on the terms set forth therein. Any Shares offered and sold to the Purchaser will be issued pursuant to the Shelf Registration Statement and the prospectus supplement relating to offering of shares pursuant to the Purchase Agreement filed with the SEC on April 27, 2020.

On any business day over the term of the Purchase Agreement (each, a “Purchase Date”), we had the right, in our sole discretion, to present the Purchaser with a purchase notice directing the Purchaser to purchase up to 650,000 shares of our common stock per business day. We and the Purchaser also could mutually agree to increase the number of shares that may be sold to as much as an additional 3,600,000 shares per Purchase Date. We also had the right, in our sole discretion, to grant the Purchaser an option to purchase additional shares of common stock, subject to a maximum number of shares determined by us on each Purchase Date. The aggregate purchase price paid by the Purchaser could not exceed $5.0 million per Purchase Date, unless mutually agreed upon by us and the Purchaser. The purchase price of our common stock pursuant to the Purchase Agreement would generally be equal to 97.5% of the daily volume weighted average purchase price of our common stock on the Purchase Date. During the nine months ended September 30, 2020, we sold an aggregate of 1,423,077 shares of our common stock pursuant to the Purchase Agreement for aggregate net proceeds of $8.0 million. We voluntarily terminated the Purchase Agreement effective October 27, 2020. The Purchase Agreement was terminable by us at will with no penalty.

Sales Agreement

On April 27, 2020, we entered into a Sales Agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners, as sales agent (the “Sales Agent”), pursuant to which we may offer and sell through or to the Sales Agent (the “Offering”) up to $250.0 million in shares of our common stock (the “Shares”). Any Shares offered and sold in the Offering will be issued pursuant to the Shelf Registration Statement and the prospectus supplement relating to the Offering filed with the SEC on April 27, 2020. The Offering will terminate upon (a) the election of the Sales Agent upon the occurrence of certain adverse events, (b) three business days’ advance notice from one party to the other, or (c) the sale of all of the Shares. Under the terms of the Sales Agreement, the Sales Agent will be entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of shares under the Sales Agreement. During the nine months ended September 30, 2020, we sold an aggregate of 17,579,496 shares of our common stock pursuant to the Sales Agreement for aggregate net proceeds of approximately $122.8 million. Subsequent to September 30, 2020 and through November 6, 2020, we sold an aggregate of 4,596,637 shares of our common stock pursuant to the Sales Agreement for aggregate net proceeds of approximately $36.2 million.

Purchase Agreement with Aspire Capital

In February 2020, we entered into a Common Stock Purchase Agreement (the “Aspire Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”), pursuant to which Aspire Capital was committed to purchase up to an aggregate of $75.0 million of shares of our common stock over a 24-month term. Upon execution of the Aspire Purchase Agreement, we issued to Aspire Capital 897,308 shares of our common stock as a commitment fee. We have used the proceeds we receive under the Aspire Purchase Agreement for working capital and general corporate purposes and for the repayment of debt. The Aspire Purchase Agreement was terminable by us at any time without any liability to us. Generally, Aspire Capital could terminate the Aspire Purchase Agreement at any time that an event of default existed. During the nine months ended September 30, 2020, we issued and sold an aggregate of 38,825,010 shares of our common stock to Aspire Capital under the Aspire Purchase Agreement for aggregate net proceeds of approximately $75.0 million. On April 24, 2020, the Aspire Purchase Agreement terminated effective immediately in accordance with its terms as we issued and sold, as of such date, the full $75.0 million of shares available for issuance thereunder.

2019 Registered Direct Offering

In October 2019, we announced the closing of our previously announced registered direct offering of 10,869,566 shares of our common stock and warrants to purchase up to 10,869,566 shares of our common stock, at a combined purchase price of $2.30 per share and related warrant. The net proceeds from this offering were approximately $23.4 million, after deducting the placement agent’s fees and other estimated offering expenses and were received in October 2019.

Equity Distribution Agreement

In October 2019, we entered into an Equity Distribution Agreement (the “Distribution Agreement”) with JMP Securities LLC, as sales agent (the “JMP Sales Agent”), pursuant to which we could offer and sell, from time to time, through or to the JMP Sales Agent, as sales agent or principal, up to $75.0 million in shares of our common stock. Effective February 10, 2020, we voluntarily suspended our continuous offering and sale of shares under the Distribution Agreement. On April 27, 2020, we voluntarily terminated the Distribution Agreement. The Distribution Agreement was terminable at will by us with no penalty. During the term of the Distribution Agreement, we sold an aggregate of 2,120,149 shares of our common stock thereunder for aggregate gross proceeds of approximately $7.4 million.

2019 Public Offering of Common Stock and Warrants

In June 2019, we entered into an underwriting agreement with JMP Securities LLC, as representative of the several underwriters named therein, relating to a firm commitment underwritten public offering. The net proceeds from this offering were approximately $23.3 million, after deducting underwriting discounts and commissions and other estimated offering expenses and were received in July 2019.

Contingent Consideration

We have contingent consideration obligations in connection with certain acquisition and licensing transactions that are contingent upon achieving certain specified milestones or the occurrence of certain events, including those described within the accompanying notes to the consolidated financial statements in Part I, Item 1 of this Form 10-Q. Upon the achievement of such milestones or the occurrence of such events, we will be obligated to make certain cash or stock payments in accordance with the terms of such acquisition and license agreements.

Use of Cash

Cash Flows from Operating Activities. Net cash used for operating activities was $118.7 million for the nine months ended September 30, 2020 as compared to $137.0 million for the nine months ended September 30, 2019. Net cash used reflects the cash spent on our research activities and cash spent to support the commercial launch of our products.

We expect to continue to incur substantial and increasing losses and negative net cash flows from operating activities as we seek to expand and support our clinical and pre-clinical development and research activities, support the commercial launch of our products and fund our joint ventures, collaborations and other third party agreements.

Cash Flows from Investing Activities. Net cash used by investing activities was $28.5 million for the nine months ended September 30, 2020. We invested approximately $22.3 million in licensing arrangements, which are further described in Note 6 of the accompanying notes to the financial statements in Part I, Item I of this Form 10-Q. We also invested approximately $2.3 million in new technologies and preclinical programs and spent approximately $3.8 million on equipment and building improvements. During the nine months ended September 30, 2019, net cash used by investing activities was $27.8 million and was attributed to $17.0 million associated with the Semnur acquisition, $9.6 million for equipment and building improvements and $1.2 million in capital contributions to joint ventures related to our preclinical programs.

Cash Flows from Financing Activities. Net cash provided by financing activities was $185.8 million for the nine months ended September 30, 2020 as compared to net cash provided by financing of $41.0 million for the nine months ended September 30, 2019. During the nine months ended September 30, 2020, we received $213.0 million from equity offerings, proceeds from short-term debt of $7.8 million and proceeds of $97.8 million from common stock issuances and warrant exercises. During the nine months ended September 30, 2020, we repaid $120.0 million of outstanding principal under the Term Loans, paid $6.3 million of related exit and prepayment fees thereon, made payments of $3.5 million on the Scilex Notes and repaid $3.0 million in short-term debt. During the same period in prior year, cash provided by financing activities was primarily driven by proceeds from equity offerings of approximately $23.3 million and $18.9 million in debt financing, net of issuance costs, from the Term Loans.

Future Liquidity Needs. We have principally financed our operations through underwritten public offerings and private debt and equity financings, as we have not generated any significant product related revenue from our principal operations to date, and do not expect to generate significant 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 plans for clinical and preclinical trials and new product development, as well as to fund operations generally. 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. These conditions, among others, raise substantial doubt about our ability to continue as a going concern.

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we issue additional equity securities to raise funds, the ownership percentage of existing stockholders would be reduced. New investors may demand rights, preferences or privileges senior to those of existing holders of common stock. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates. We may also seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available.

We anticipate that we will continue to incur net losses into the foreseeable future as we: (i) advance our product pipeline and other product candidates into clinical trials, (ii) continue our development of, and seek regulatory approvals for, our product candidates in clinical trials, (iii) expand our corporate infrastructure, and (iv) incur our share of joint venture and collaboration costs for our products and technologies.

Uses of Cash. As further described in Note 15 of the accompanying notes to the consolidated financial statements in Part I, Item 1 of this Form 10-Q, we have and plan to expand our business and intellectual property portfolio through the acquisition of new businesses and technologies as well as entering into licensing arrangements.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements which are prepared in accordance with accounting principles generally accepted in the U.S. 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 debt with detachable warrants, derivative liabilities, revenue recognition, leases, acquisition consideration payable, 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. Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and there have been no material changes during the nine months ended September 30, 2020.

Contractual Obligations and Commitments

As of September 30, 2020, there were no material changes outside of the ordinary course of business, in our outstanding contractual obligations from those disclosed within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Off-Balance Sheet Arrangements

Since our inception through September 30, 2020, other than off balance sheet arrangements already disclosed, we have not engaged in any off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.

New Accounting Pronouncements

Refer to Note 1, “Significant Accounting Policies” and “Recent Accounting Pronouncements” in the accompanying notes to the consolidated financial statements in Part I, Item 1 of this Form 10-Q for a discussion of recent accounting pronouncements.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

As of September 30, 2020, there has been no material change in our assessment of our sensitivity to market risk, including interest rate, capital market and concentration risks, since our presentation set forth in Item 7A, “Quantitative and Qualitative Disclosures About Market Risk”, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such terms are defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance. As a result, management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation performed, our principal executive officer and our 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. Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we carried out an evaluation of any potential changes in our internal control over financial reporting during the fiscal quarter covered by this Quarterly Report on Form 10-Q. There has been no change to our internal control over financial reporting during our most recent fiscal quarter that our certifying officers concluded materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.Legal Proceedings.

In the normal course of business, we may be named as a defendant in one or more lawsuits. Other than as set forth below, we are not a party to any outstanding material litigation and management is currently not aware of any legal proceedings that, individually or in the aggregate, are deemed to be material to our financial condition or results of operations.

Information regarding reportable legal proceedings is contained in Part I, “Item 3. Legal Proceedings” in our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, “Item 1. Legal Proceedings” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

On May 26, 2020, Wasa Medical Holdings filed a putative federal securities class action in the U.S. District Court for the Southern District of California, Case No. 3:20-cv-00966-AJB-DEB, against us, our President, Chief Executive Officer and Chairman of the Board of Directors, Henry Ji, Ph.D., and our SVP of Regulatory Affairs, Mark R. Brunswick, Ph.D. The action alleges that we, Dr. Ji and Dr. Brunswick made materially false and/or misleading statements to the investing public by publicly issuing false and/or misleading statements regarding STI-1499 and its ability to inhibit the SARS-CoV-2 virus infection and that such statements violated Section 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The suit seeks to recover damages caused by the alleged violations of federal securities laws, along with the plaintiffs’ reasonable costs and expenses incurred in the lawsuit, including counsel fees and expert fees. On June 11, 2020, Jeannette Calvo filed a second putative federal securities class action in the U.S. District Court for the Southern District of California, Case No. 3:20-cv-01066-JAH-WVG, against the same defendants alleging the same claims and seeking the same relief. It is anticipated that these cases will be consolidated as part of the lead plaintiff and counsel appointment process under the Private Securities Litigation Reform Act. We are defending these matters vigorously.

Item 1A.Risk Factors.

Our Annual Report on Form 10-K for the year ended December 31, 2019, Part I –Item 1A, Risk Factors, describes important risk factors that could cause our business, financial condition, results of operations and growth prospects to differ materially from those indicated or suggested by forward-looking statements made in this Quarterly Report on Form 10-Q or presented elsewhere by management from time to time. Except as set forth below, there have been no material changes in our risk factors since the filing of our Annual Report on Form 10-K for the year ended December 31, 2019. 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.

Risks Related to Our Financial Position and Capital Requirements

We are a clinical stage company subject to significant risks and uncertainties, including the risk that we or our partners may never develop, obtain regulatory approval or market any of our product candidates or generate product related revenues.

We are primarily a clinical stage biotechnology company that began operating and commenced research and development activities in 2009. Pharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. There is no assurance that our libraries of fully-human mAbs or any of our other product candidates in development will be suitable for diagnostic or therapeutic use, or that we will be able to identify and isolate therapeutic product candidates, or develop, market and commercialize these candidates. We do not expect any of our product candidates in development, including, but not limited to, our fully-human mAbs, biosimilars/biobetters, fully human anti-PD-L1 and anti-PD-1 checkpoint inhibitors derived from our proprietary G-MAB™ library platform, antibody drug conjugates (“ADCs”), bispecific antibodies (“BsAbs”), as well as Chimeric Antigen Receptor T Cells (“CAR-T”) and Dimeric Antigen Receptor T Cells (“DAR-T”) for adoptive cellular immunotherapy, resiniferatoxin (“RTX”), higher strength lidocaine topical system (SP-103) and non-opioid corticosteroid formulated as a viscous gel injection (SP-102) (“SEMDEXA^TM”) to be commercially available for a few years, if at all. Additionally, our COVID-19 related product candidates, including STI-1499 (neutralizing antibody; COVI-GUARD^TM), STI-2020 (affinity matured neutralizing antibody; COVI-AMG^TM), neutralizing antibody cocktail (COVI-SHIELD^TM), STI-5656 (Abivertinib), STI-4398 (ACE2 receptor decoy protein; COVIDTRAP^TM), STI-3333 (targeted virus vaccine; T-VIVA-19^TM), , STI-2030 (Salicyn-30) serological IgM/IgG antibody diagnostic test (COVI-TRACK^TM), saliva-based antigen diagnostic test for SARS-CoV-2 (COVI-TRACE^TM) and lateral flow viral antigen diagnostic test for SARS-CoV-2 (COVI-STIX^TM), are subject to uncertainties relating to product development, regulatory approval and commercialization, and further risks based on the constantly evolving situation affecting the United States and the international community. 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 incurred significant losses since inception and anticipate that we will incur continued losses for the foreseeable future.

As of September 30, 2020 and December 31, 2019, we had an accumulated deficit of $886.8 million and $659.8 million, respectively. We continue to incur significant research and development and other expenses related to our ongoing operations. We have incurred operating losses since our inception, expect to continue to incur significant operating losses for the foreseeable future, and we expect these losses to increase as we: (i) advance RTX, STI-6129 (anti-CD38 ADC), SP-103, SEMDEXA^TM and our other product candidates, including our COVID-19 related product candidates, STI-1499 (COVI-GUARD^TM) and STI-5656 (Abivertinib), into further clinical trials and pursue other development, acquire, develop and manufacture clinical trial materials and increase other regulatory operating activities, (ii) conduct further studies for our preclinical COVID-19 related product candidates, including STI-2020 (COVI-AMG^TM), neutralizing antibody cocktail (COVI-SHIELD^TM), STI-4398 (COVIDTRAP^TM), targeted virus vaccine (T-VIVA-19^TM) and STI-2030 (Salicyn-30), to advance to clinical trials and seek regulatory approval; (iii) incur incremental expenses associated with our efforts to further advance a number of potential product candidates into preclinical development activities, (iv) continue to identify and advance a number of fully human therapeutic antibody and ADC preclinical product candidates, (v) incur higher salary, lab supply and infrastructure costs incurred in connection with supporting all of our programs, (vi) invest in our joint ventures, collaborations or other third party agreements, (vii) incur expenses in conjunction with defending and enforcing our rights in various litigation matters, (viii) expand our corporate, development and manufacturing infrastructure, and (ix) support our subsidiaries, including Scilex Holding Company and SmartPharm Therapeutics, Inc., in their clinical trial, development and commercialization efforts. As such, we are subject to all risks incidental to the development of new biopharmaceutical products and related companion diagnostics, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

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 may not be able to attract or retain qualified management and scientific and clinical personnel in the future due to the intense competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the San Diego, California area. Our industry has experienced a high rate of turnover of management personnel in recent years. If we are not able to attract, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the successful development of any product candidates, our ability to raise additional capital and our ability to

implement our overall business strategy. In addition, our CMO operations will depend, in part, on our ability to attract and retain an appropriately skilled and sufficient workforce to operate our development and manufacturing facilities. The facilities are located in a growing biotechnology hub and competition for skilled workers will continue to increase as the industry undergoes further growth in the area.

We are highly dependent on key members of our management and scientific staff, especially Henry Ji, Ph.D., Chairman of the Board, Chief Executive Officer and President. Our success also depends on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level and senior scientific and medical personnel. The loss of any of our executive officers, key employees or key consultants and our inability to find suitable replacements could impede the achievement of our research and development objectives, and potentially harm our business, financial condition and prospects. 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 any time.

We may not be able to attract or retain qualified management and scientific personnel in the future due to the intense competition for a limited number of qualified personnel among biopharmaceutical, biotechnology, pharmaceutical and other businesses. Many of the other pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high quality candidates than what we have to offer. If we are unable to continue to attract and retain high quality personnel, the rate and success at which we can develop and commercialize product candidates will be limited.

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 require substantial additional funding, which may not be available to us on acceptable terms, or at all. If we fail to raise the necessary additional capital, we may be unable to complete the development and commercialization of our product candidates or continue our development programs.

Our operations have consumed substantial amounts of cash since inception. We expect to significantly increase our spending to advance the preclinical and clinical development of our product candidates and launch and commercialize any product candidates for which we receive regulatory approval, including building our own commercial organization to address certain markets. We will require additional capital for the further development and commercialization of our product candidates, as well as to fund our other operating expenses and capital expenditures.

As a result of our recurring losses from operations, recurring negative cash flows from operations and substantial cumulative losses, there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt about our ability to continue as a going concern. If we are unsuccessful in our efforts to raise outside financing, we may be required to significantly reduce or cease operations. The report of our independent registered public accounting firm on our audited financial statements for the year ended December 31, 2019 included a “going concern” explanatory paragraph indicating that our recurring losses from operations, negative working capital, recurring negative cash flows from operations and substantial cumulative net losses raise substantial doubt about our ability to continue as a going concern.

We cannot be certain that additional funding will be available on acceptable terms, or at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates. We may also seek collaborators for one or more of our current or future product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available. Any of these events could significantly harm our business, financial condition and prospects.

Our future capital requirements will depend on many factors, including:

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the progress of the development of our fully-human mAbs, including biosimilars/biobetters, fully human anti-PD-L1 and anti-PD-1 checkpoint inhibitors derived from our proprietary G-MAB™ library platform, ADCs, BsAbs, CAR-T and DAR-T for adoptive cellular immunotherapy, RTX, SP-103 and SEMDEXA^TM, and our COVID-19 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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the effect of competing technological and market developments;

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the terms and timing of any collaborative, licensing and other arrangements that we may establish;

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general market conditions for offerings from biopharmaceutical companies;

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

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our obligations under our debt arrangements;

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the time and costs involved in defending and enforcing our rights in various litigation matters;

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the effect of the COVID-19 pandemic; and

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

In order to carry out our business plan and implement our strategy, 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, joint ventures, public or private equity or debt financing, bank lines of credit, asset sales, government grants 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 or equity 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 product candidates or marketing territories.

In addition, as discussed in the risk factor under the heading “The terms of our outstanding debt place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business” below, the Scilex Indenture includes negative covenants that place limitations on the following: the incurrence of debt, the payment of dividends by Scilex, the repurchase of shares and, under certain conditions, making certain other restricted payments, the prepayment, redemption or repurchase of subordinated debt, a merger, amalgamation or consolidation involving Scilex Pharma, engaging in certain transactions with affiliates; and the making of investments other than those permitted by the Scilex Indenture.

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 or require that we wind down our operations altogether.

Risks Related to Our Business and Industry

We face potential business disruptions and related risks resulting from the recent outbreak of the novel coronavirus, which could have a material adverse effect on our business, financial condition and results of operations.

In December 2019, a novel strain of coronavirus, or SARS-CoV-2, was reported to have surfaced in Wuhan, China. SARS-CoV-2 is the virus that causes COVID-19. The COVID-19 outbreak has grown into a global pandemic that has impacted Asia, United States, Europe and other countries throughout the world. Financial markets have been experiencing extreme fluctuations that may cause a contraction in available liquidity globally as important segments of the credit markets react to the development. The pandemic may lead to a decline in business and consumer confidence. The global outbreak of COVID-19 continues to rapidly evolve. As a result, businesses have closed and limits have been placed on travel. The extent to which COVID-19 may impact our business, clinical trials and sales of ZTlido® (lidocaine topical system 1.8%) (“ZTlido”) will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

We are monitoring the potential impact of the COVID-19 outbreak, and if COVID-19 continues to spread globally, including in the United States, we may experience disruptions that could severely impact the development of our product candidates, including:

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delays or difficulties in enrolling patients in our clinical trials as patients may be reluctant, or unable, to visit clinical sites;

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delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators, clinical site staff and potential closure of clinical facilities;

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decreases in patients seeking treatment for chronic pain;

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delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

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delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials, including interruption in global shipping that may affect the transport of clinical trial materials;

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changes in local regulations as part of a response to the COVID-19 outbreak, which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

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diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

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risk that participants enrolled in our clinical trials will acquire COVID-19 while the clinical trial is ongoing, which could impact the results of the clinical trial, including by increasing the number of observed adverse events;

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delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and

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interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others.

Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party suppliers in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain. Any manufacturing supply interruption of materials could adversely affect our ability to conduct ongoing and future research and testing activities. For example, we obtain our commercial supply of ZTlido and our clinical supply of SP-103 exclusively from Oishi and Itochu in Japan. The COVID-19 pandemic may result in delays in the procurement and shipping of ZTlido, which may have an adverse impact on our operating results.

The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

In addition, the continued spread of COVID-19 globally could materially and adversely impact our operations, including without limitation, our sales and marketing efforts, sales of ZTlido, travel, employee health and availability, which may have a material and adverse effect on our business, financial condition and results of operations.

Management is actively monitoring the global situation on our financial condition, liquidity, operations, suppliers, industry and workforce. Given the daily evolution of the COVID-19 outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 outbreak on our results of operations, financial condition or liquidity for fiscal year 2020.

Drug development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

Clinical testing is expensive and can take many years to complete, and its outcome is risky and uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. It is not uncommon for companies in the pharmaceutical industry to suffer significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. Our future clinical trial results may not be successful.

This drug candidate development risk is heightened by any changes in the planned clinical trials compared to the completed clinical trials. As product candidates are developed through preclinical to early and late stage clinical trials towards approval and commercialization, it is customary that various aspects of the development program, such as manufacturing and methods of administration, are altered along the way in an effort to optimize processes and results. While these types of changes are common and are intended to optimize the product candidates for late stage clinical trials, approval and commercialization, such changes do carry the risk that they will not achieve these intended objectives.

Other than with respect to ZTlido, we have not completed a corporate-sponsored clinical trial. Phase I trials are ongoing for RTX for knee osteoarthritis, RTX for cancer-related pain and anti-CD38 CAR-T for multiple myeloma and a Phase III trial is ongoing for SEMDEXA^TM for the treatment of lumbosacral radicular pain. Non-clinical studies are ongoing and a Phase II trial is planned to start in the first half of 2021 with higher strength SP-103. We are currently in a Phase II study of abivertinib for cytokine storm related to COVID-19 infection, a Phase I study of mesenchymal stem cells for the treatment of respiratory distress syndrome associated with

COVID-19 infection and a Phase I study of COVI-GUARD in hospitalized patients with COVID-19. Despite this, we may not have the necessary capabilities, including adequate staffing, to successfully manage the execution and completion of any clinical trials we initiate, including our planned clinical trials of RTX, clinical trials of SP-103, clinical trials of SEMDEXA^TM, clinical trials of CAR-T, including targeting CD38 using a CAR-T cell therapy, our biosimilar/biobetters antibodies, clinical trials of our COVID-19 related product candidates and other product candidates, in a way that leads to our obtaining marketing approval for our product candidates in a timely manner, or at all.

In the event we are able to conduct a pivotal clinical trial of a product candidate, the results of such trial may not be adequate to support marketing approval. Because our product candidates are intended for use in life-threatening diseases, in some cases we ultimately intend to seek marketing approval for each product candidate based on the results of a single pivotal clinical trial. As a result, these trials may receive enhanced scrutiny from the FDA. For any such pivotal trial, if the FDA disagrees with our choice of primary endpoint or the results for the primary endpoint are not robust or significant relative to control, are subject to confounding factors, or are not adequately supported by other study endpoints, including possibly overall survival or complete response rate, the FDA may refuse to approve a New Drug Application, Biologics License Application or other application for marketing based on such pivotal trial. The FDA may require additional clinical trials as a condition for approving our product candidates.

There can be no assurance that the product candidates we are developing for the detection and treatment of COVID-19 will be granted an Emergency Use Authorization by the FDA. If no Emergency Use Authorization is granted or, once granted, it is terminated, we will be unable to sell our product candidates in the near future and will be required to pursue the drug approval process, which is lengthy and expensive.

On June 10, 2020, we announced the submission of an Emergency Use Authorization (“EUA”) to the FDA for our COVI-TRACK in vitro diagnostic test kit for the independent detection of IgG and IgM antibodies in sera of patients exposed to the SARS-CoV-2 virus.

An EUA would allow us to market and sell COVI-TRACK without the need to pursue the lengthy and expensive drug approval process. The FDA may issue an EUA during a public health emergency if it determines that the potential benefits of a product outweigh the potential risks and if other regulatory criteria are met. If an EUA is granted for COVI-TRACK, we will rely on the FDA policies and guidance in connection with the marketing and sale of COVI-TRACK. If these policies and guidance change unexpectedly and/or materially or if we misinterpret them, potential sales of COVI-TRACK could be adversely impacted. In addition, the FDA may revoke an EUA where it is determined that the underlying health emergency no longer exists or warrants such authorization. If granted, we cannot predict how long an EUA for COVI-TRACK will remain in place. The termination of an EUA for COVI-TRACK, if granted, could adversely impact our business, financial condition and results of operations.

We may also seek additional EUAs from the FDA for our other product candidates for the detection and/or treatment of COVID-19 and the SARS-CoV-2 virus. If granted, the additional EUAs would allow us to market and sell additional product candidates without the need to pursue the lengthy and expensive drug approval process. There is no guarantee that we will be able to obtain any additional EUAs. Failure to obtain additional EUAs or the termination of such EUAs, if obtained, could adversely impact our business, financial condition and results of operations.

Our business and operations would suffer in the event of system failures.

Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, cybersecurity attacks or hacking, natural disasters, terrorism, war and telecommunication and electrical failures. In addition, as a result of the COVID-19 pandemic, we may face increased cybersecurity risks due to our reliance, and the reliance of our CROs, contractors and consultants reliance, on internet technology and the number of our employees, and employees of our CROs, contractors and consultants, who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. While we have not experienced any such system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug development programs. For example, the loss of clinical trial data from completed or ongoing or planned clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims and liability, damage to our reputation, suffer loss or harm to our intellectual property rights and the further research, development and commercial efforts of our products and product candidates could be delayed. If we are held liable for a claim against which we are not insured or for damages exceeding the limits of our insurance coverage, whether arising out of cybersecurity matters, or from some other matter, that claim could have a material adverse effect on our results of operations.

Further, a cybersecurity attack, data breach or privacy violation that leads to disclosure or modification of, or prevents access to, patient information, including personally identifiable information or protected health information, could harm our reputation, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to liability under laws and regulations that protect

personal data, resulting in increased costs or loss of revenue. Our ability to effectively manage and maintain our internal business information, and to ship products to customers and invoice them on a timely basis, depends significantly on our enterprise resource planning system and other information systems. Portions of our information technology systems may experience interruptions, delays or cessations of service or produce errors in connection with ongoing systems implementation work. Cybersecurity attacks in particular are evolving and include, but are not limited to, threats, malicious software, ransom ware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, misappropriation of confidential or otherwise protected information and corruption of data. If we are unable to prevent such cybersecurity attacks, data security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other regulatory penalties because of lost or misappropriated information, including sensitive patient data. In addition, these breaches and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

The terms of our outstanding debt place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

On September 7, 2018, Scilex Pharma issued and sold senior secured notes due 2026 in an aggregate principal amount of $224,000,000 (the “Scilex Notes”) for an aggregate purchase price of $140,000,000 (the “Scilex Offering”). In connection with the Scilex Offering, we also entered into an indenture, as amended (the “Scilex Indenture”), governing the Scilex Notes with U.S. Bank National Association, a national banking association, as trustee (the “Trustee”) and collateral agent, and Scilex Pharma. Pursuant to the Scilex Indenture, we agreed to irrevocably and unconditionally guarantee, on a senior unsecured basis, the punctual performance and payment when due of all obligations of Scilex Pharma under the Scilex Indenture.

The Scilex Indenture governing the Scilex Notes contains customary events of default with respect to the Scilex Notes (including a failure to make any payment of principal on the Scilex Notes when due and payable), and, upon certain events of default occurring and continuing, the Trustee by notice to Scilex Pharma, or the holders of at least 25% in principal amount of the outstanding Scilex Notes by notice to Scilex Pharma and the Trustee, may (subject to the provisions of the Scilex Indenture) declare 100% of the then-outstanding principal amount of the Scilex Notes to be due and payable. Upon such a declaration of acceleration, such principal will be due and payable immediately. In the case of certain events, including bankruptcy, insolvency or reorganization involving us or Scilex Pharma, the Scilex Notes will automatically become due and payable.

Pursuant to the Scilex Indenture, we and Scilex Pharma must also comply with certain covenants with respect to the commercialization of ZTlido, as well as customary additional affirmative covenants, such as furnishing financial statements to the holders of the Scilex Notes, minimum cash requirements and net sales reports, and negative covenants, including limitations on the following: the incurrence of debt, the payment of dividends by Scilex Pharma, the repurchase of shares and, under certain conditions, making certain other restricted payments, the prepayment, redemption or repurchase of subordinated debt, a merger, amalgamation or consolidation involving Scilex Pharma, engaging in certain transactions with affiliates; and the making of investments other than those permitted by the Scilex Indenture.

For purposes of the Scilex Indenture, an event of default includes, among other things, (i) a failure to pay any amounts when due under the Scilex Indenture, (ii) a breach or other failure to comply with the covenants (including financial, notice and reporting covenants) under the Scilex Indenture, (iii) a failure to make any payment on, or other event triggering an acceleration under, other material indebtedness of us and (iv) the occurrence of certain insolvency or bankruptcy events (both voluntary and involuntary) involving us or certain of our subsidiaries.

If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

Any disruption in our research and development facilities could adversely affect our business, financial condition and results of operations.

Our principal executive offices, which house our research and development programs, are in San Diego, California. Our facilities may be affected by natural or man-made disasters. Earthquakes are of particular significance since our facilities are located in an earthquake-prone area. We are also vulnerable to damage from other types of disasters, including power loss, attacks from extremist organizations, fires, floods and similar events. If our facilities are affected by a natural or man-made disaster, we may be forced to curtail our operations and/or rely on third-parties to perform some or all of our research and development activities. Although we believe we possess adequate insurance for damage to our property and the disruption of our business from casualties, such insurance may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. In the future, we may choose to expand our operations in either our existing facilities or in new facilities. If we expand our worldwide manufacturing locations, there can be no assurance that this expansion will occur without implementation difficulties, or at all.

Effective October 10, 2020, the health officer of San Diego County, where our principal executive offices are located, issued an updated shelter-in-place order, ordering, among other things, that all individuals living in the County of San Diego to remain in their homes or at their place of residence for an indefinite period of time (subject to certain exceptions for essential businesses and to facilitate authorized necessary activities and reopened businesses) to mitigate the impact of the COVID-19 pandemic. The order is scheduled to continue until further notice from the health officer of San Diego County. In addition, in mid-March 2020, the Governor of California and the State Public Health Officer and Director of the California Department of Public Health ordered all individuals living in the State of California to stay at their place of residence for an indefinite period of time (subject to certain exceptions to facilitate authorized necessary activities, and subject to certain variances approved by the California Department of Public Health on a county-by-county basis) to mitigate the impact of the COVID-19 pandemic. The executive order exempts certain individuals needed to maintain continuity of operations of essential critical infrastructure sectors and additional sectors as the State Public Health Officer may designate as critical to protect health and well-being of all Californians. In May 2020, the Governor of California issued an executive order that informed local health jurisdictions and industry sectors that they may gradually reopen under new modifications and guidance provided by the state of California. In August 2020, the state of California released revised criteria for loosening and tightening restrictions on certain activities on generally a county-by-county basis. Under the executive orders, San Diego County, where our principal executive offices are located, continues to be subject to certain restrictions. These orders and others may be further modified, amended and adopted depending upon the COVID-19 transmission rates in our county and state, as well as other factors. If the operations in our principal executive offices or other facilities are deemed non-essential, we may not be able to operate for the duration of any shelter-in-place order, which could negatively impact our business, operating results and financial condition.

We are involved, and may become involved in the future, in disputes and other legal or regulatory proceedings that, if adversely decided or settled, could materially and adversely affect our business, financial condition and results of operations.

We are, and may in the future become, party to litigation, regulatory proceedings or other disputes. For example, on April 3, 2019, we filed two legal actions against, among others, Patrick Soon-Shiong and entities controlled by him, asserting claims for, among other things, fraud and breach of contract, arising out of Dr. Soon-Shiong’s purchase of the drug Cynviloq™ from our company in May 2015. The actions allege that Dr. Soon-Shiong and the other defendants, among other things, acquired the drug Cynviloq™ for the purpose of halting its progression to the market. As an additional example, on May 26, 2020, Wasa Medical Holdings filed a putative federal securities class action against us, our President, Chief Executive Officer and Chairman of the Board of Directors, Henry Ji, Ph.D., and our SVP of Regulatory Affairs, Mark R. Brunswick, Ph.D., alleging that we, Dr. Ji and Dr. Brunswick made materially false and/or misleading statements to the investing public regarding STI-1499 and its ability to inhibit the SARS-CoV-2 virus infection. A second putative federal securities class action was filed in the U.S. District Court for the Southern District of California against the same defendants alleging the same claims and seeking the same relief. In general, claims made by or against us in disputes and other legal or regulatory proceedings can be expensive and time consuming to bring or defend against, requiring us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations. While we intend to pursue any claims made by us, or defend against any claims brought against us, vigorously, we cannot predict the outcomes of such claims. Any failure to prevail in any claims made by us or any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Acquisitions

We have and plan to continue to acquire assets, businesses and technologies and may fail to realize the anticipated benefits of the acquisitions, and acquisitions can be costly and dilutive.

We have and plan to continue to expand our assets, business and intellectual property portfolio through the acquisition of new assets, businesses and technologies.

For example, in November 2016, we acquired a majority of the outstanding capital stock of Scilex Pharma, which was contributed to our majority-owned subsidiary Scilex Holding in connection with the corporate reorganization of Scilex Holding and acquisition of Semnur by Scilex Holding in March 2019. These assets, together, constitute our Scilex segment. We also acquired Virttu in 2017 and Sofusa^®assets, a revolutionary drug delivery technology, in July 2018, and we are in the process of integrating this company and technology with ours. We also acquired SmartPharm Therapeutics, Inc. in September 2020, and are in the process of integrating this company and its technology with ours. In addition, in October 2020, we announced our potential acquisition of ACEA Therapeutics, Inc.

The success of any acquisition depends on, among other things, our ability to combine our business with the acquired business in a manner that does not materially disrupt existing relationships and that allows us to achieve development and operational synergies. If we are unable to achieve these objectives, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected. In particular, the acquisition may not be accretive to our stock value or development pipeline in the near or long term.

It is possible that the integration process could result in the loss of key employees; the disruption of our ongoing business or the ongoing business of the acquired companies; or inconsistencies in standards, controls, procedures or policies that could adversely affect our ability to maintain relationships with third parties and employees or to achieve the anticipated benefits of the acquisition. Integration efforts between us and the acquired company will also divert management’s attention from our core business and other opportunities that could have been beneficial to our stockholders. An inability to realize the full extent of, or any of, the anticipated benefits of the acquisition, as well as any delays encountered in the integration process, could have an adverse effect on our business and results of operations, which may affect the value of the shares of our common stock after the completion of the acquisition. If we are unable to achieve these objectives, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected. In particular, the acquisition may not be accretive to our stock value or development pipeline in the near or long term.

We expect to incur additional costs integrating the operations of any companies we acquire, higher development and regulatory costs, and personnel, which cannot be estimated accurately at this time. If the total costs of the integration of our companies and advancement of acquired product candidates and technologies exceed the anticipated benefits of the acquisition, our financial results could be adversely affected.

In addition, we may issue shares of our common stock or other equity-linked securities in connection with future acquisitions of businesses and technologies. Any such issuances of shares of our common stock could result in material dilution to our existing stockholders.

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 prices for securities of biotechnology and pharmaceutical companies have historically been highly volatile, and the market has from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. For example, from July 1, 2019 to September 30, 2020, our closing stock price ranged from $1.45 to $18.82 per share. 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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actual or anticipated adverse results or delays in our clinical trials;

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our failure to commercialize our product candidates, if approved;

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unanticipated serious safety concerns related to the use of any of our product candidates;

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adverse regulatory decisions;

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changes in laws or regulations applicable to our product candidates, including but not limited to clinical trial requirements for approvals;

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legal disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our product candidates, government investigations and the results of any proceedings or lawsuits, including, but not limited to, patent or stockholder litigation;

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our decision to initiate a clinical trial, not initiate a clinical trial or to terminate an existing clinical trial;

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our dependence on third parties, including CROs;

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announcements of the introduction of new products by our competitors;

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market conditions in the pharmaceutical and biotechnology sectors;

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announcements concerning product development results or intellectual property rights of others;

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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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failure to meet or exceed any financial guidance or expectations regarding development milestones that we may provide to the public;

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actual or anticipated variations in quarterly operating results;

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our failure to meet or exceed the estimates and projections of the investment community;

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overall performance of the equity markets and other factors that may be unrelated to our operating performance or the operating performance of our competitors, including changes in market valuations of similar companies;

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conditions or trends in the biotechnology and biopharmaceutical industries;

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introduction of new products offered by us or our competitors;

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announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;

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issuances of debt or equity securities;

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sales of our common stock by us or our stockholders in the future;

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trading volume of our common stock;

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ineffectiveness of our internal controls;

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publication of research reports about us or our industry or positive or negative recommendations or withdrawal of research coverage by securities analysts;

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failure to effectively integrate the acquired companies’ operations;

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general political and economic conditions;

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effects of natural or man-made catastrophic events

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effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic; and

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other events or factors, many of which are beyond our control.

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. The realization of any of the above risks or any of a broad range of other risks, including those described in these “Risk Factors,” could have a dramatic and material adverse impact on the market price of our common stock.

We have not paid cash dividends in the past and do not expect to pay cash dividends in the foreseeable future. Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. The payment of dividends on our capital stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if the common stock price appreciates.

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

Since June 30, 2020, we have issued the following securities that were not registered under the Securities Act:

On September 8, 2020, we entered into a patent and know-how license agreement (the “License Agreement”) with Mayo Foundation for Medical Education and Research (“Mayo”), pursuant to which Mayo granted us a license under certain of Mayo’s patents, know-how and materials relating to targeted nano-particle therapies to reproduce, use, commercialize and exploit related products, processes and services for the prevention, diagnosis and/or treatment of human diseases and conditions worldwide. As partial consideration for the license, we paid Mayo an upfront license fee of $9.3 million, which was comprised solely of 996,803 shares of our common stock, which were issued on September 15, 2020.

The issuances of the shares to Mayo were not registered under the Securities Act in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act as the transaction did not involve a public offering.

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other Information.

Change of Control Severance Agreement

On November 5, 2020, we entered into a Change of Control and Severance Agreement (the “Severance Agreement”) with Najjam Asghar, our Senior Vice President and Chief Financial Officer. Pursuant to the Severance Agreement, if Mr. Asghar’s employment is terminated without “cause” or by Mr. Asghar for “good reason,” in either case during the period commencing three months prior to a Change of Control (as defined in the Severance Agreement) and ending 12 months after a Change of Control, then, subject to Mr. Asghar’s timely execution and non-revocation of a release in favor of us, Mr. Asghar will be entitled to receive the following: (i) an amount equal to his then-current annual base salary, payable in a lump sum; (ii) an amount equal to his then-current target annual bonus, payable in a lump sum; (iii) 12 months of health insurance benefits for Mr. Asghar and for his eligible dependents who were covered under the Company’s health insurance plans as of the date his employment was terminated; and (iv) accelerated vesting of Mr. Asghar’s then-outstanding awards of equity compensation, with performance-criteria, if any, deemed satisfied at target.

Item 6.Exhibits.

EXHIBIT INDEX

Exhibit No.		Description

2.1+		Agreement and Plan of Merger, dated August 20, 2020, by and among Sorrento Therapeutics, Inc., SP Merger Sub, Inc., SmartPharm Therapeutics, Inc. and John C. Thomas, Jr., as representative of the stockholders of SmartPharm Therapeutics, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 20, 2020).
3.1		Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 15, 2013).
3.2		Certificate of Amendment of the Restated Certificate of Incorporation of Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 1, 2013).
3.3		Amended and Restated Bylaws of Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 3.3 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 15, 2019).
4.1		Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 23, 2009).

4.2		Voting Agreement, dated as of April 29, 2016, by and between Sorrento Therapeutics, Inc. and Yuhan Corporation (incorporated by reference to Exhibit 4.12 to the Registrant’s Registration Statement on Form S-3 filed with the SEC on June 29, 2016).
4.3		Registration Rights Agreement, dated November 8, 2016, by and among Sorrento Therapeutics, Inc. and the persons party thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 8, 2016).
4.4		Registration Rights Agreement, dated April 27, 2017, by and among Sorrento Therapeutics, Inc. and the persons party thereto (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on April 28, 2017).
4.5		Form of Common Stock Purchase Warrant issued to investors pursuant to the Securities Purchase Agreement, dated as of December 11, 2017, by and among Sorrento Therapeutics, Inc. and the purchasers identified on Schedule A thereto (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 21, 2017).
4.6		Registration Rights Agreement, dated December 21, 2017, by and among Sorrento Therapeutics, Inc. and the purchasers identified on Schedule A thereto (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 21, 2017).
4.7		Form of Common Stock Purchase Warrant issued to investors pursuant to the Securities Purchase Agreement, dated as of June 13, 2018, by and among Sorrento Therapeutics, Inc. and the purchasers identified on Schedule A thereto (incorporated by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2018).
4.8		Registration Rights Agreement, dated June 13, 2018, by and among Sorrento Therapeutics, Inc. and the purchasers identified on Schedule A thereto (incorporated by reference to Exhibit 4.3 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 9, 2018).
4.9		Form of Warrant, dated November 7, 2018, issued by Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2018).
4.10		Registration Rights Agreement, dated November 7, 2018, by and among Sorrento Therapeutics, Inc. and the parties identified on Schedule A thereto (incorporated by reference to Exhibit 4.2 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2018).

4.11		Agreement and Consent, dated November 7, 2018, by and among Sorrento Therapeutics, Inc. and the Warrant Holders party thereto (incorporated by reference to Exhibit 10.6 of the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 9, 2018).
4.12		Exchange and Registration Rights Agreement, dated as of March 18, 2019, by and among Sorrento Therapeutics, Inc. and the stockholders and stock option holders of Semnur Pharmaceuticals, Inc. set forth on Schedule A thereto, (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 22, 2019).
4.13		Form of Warrant, dated May 3, 2019, issued by Sorrento Therapeutics, Inc. (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 3, 2019).
4.14		Amendment No. 1 to the Registration Rights Agreement, dated as of May 3, 2019, by and among Sorrento Therapeutics, Inc. and the persons party thereto (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 3, 2019).
4.15		Form of Series A Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 28, 2019).
4.16		Form of Series C Warrant (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 28, 2019).
4.17		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 8, 2019).
4.18		Form of Warrant (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 9, 2019).
4.19		Amendment No. 2 to the Registration Rights Agreement, dated as of December 6, 2019, by and among Sorrento Therapeutics, Inc. and the persons party thereto (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on December 9, 2019).
4.20+		First Amendment to Exchange and Registration Rights Agreement, dated September 28, 2020, by and between Sorrento Therapeutics, Inc. and Fortis Advisors LLC in its capacity as the Equityholders’ Representative (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 2, 2020).
10.1+*		License Agreement, dated as of July 13, 2020, by and between Sorrento Therapeutics, Inc. and ACEA Therapeutics, Inc.

10.2+*		Exclusive License Agreement, dated as of July 23, 2020, by and between Sorrento Therapeutics, Inc. and The Trustees of Columbia University in the City of New York.

10.3+*		Patent and Know-How License Agreement, dated as of September 8, 2020, by and between Sorrento Therapeutics, Inc. and Mayo Foundation for Medical Education and Research.

10.4#		Performance Stock Option Award Agreement, dated as of August 7, 2020, by and between Sorrento Therapeutics, Inc. and Henry Ji, Ph.D. (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 20, 2020).

10.5#		Sorrento Therapeutics, Inc. 2020 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 20, 2020).

10.6#		Sorrento Therapeutics, Inc. 2019 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 20, 2020).

10.7#		Change of Control Severance Agreement, dated as of November 5, 2020, by and between Sorrento Therapeutics, Inc. and Najjam Ashgar.

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

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

32.1		Certification of Henry Ji, Ph.D., Principal Executive Officer and Najjam Asghar, Principal Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
101.INS		Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File, formatted in Inline Extensible Business Reporting Language (iXBRL) (embedded within the Inline XBRL document)

+	Non-material schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the SEC.

#	Management contract or compensatory plan.

Certain identified information has been omitted pursuant to Item 601(b)(10) of Regulation S-K because such information is both (i) not material and (ii) would likely cause competitive harm to the Registrant if publicly disclosed. The Registrant hereby undertakes to furnish supplemental copies of the unredacted exhibit upon request by the SEC.

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:	November 6, 2020	By:	/s/ Henry Ji, Ph.D.
			Henry Ji, Ph.D.
			Chairman of the Board of Directors, Chief Executive Officer & President
			(Principal Executive Officer)

Date:	November 6, 2020	By:	/s/ Najjam Asghar
			Najjam Asghar
			Senior Vice President & Chief Financial Officer
			(Principal Financial Officer)

Exhibit 10.1

***Certain identified information has been omitted from this exhibit because it is both (i) not material and (ii) would likely cause competitive harm to the Registrant if publicly disclosed. Such omitted information is indicated by brackets (“[...***...]”) in this exhibit. ***

LICENSE AGREEMENT

This License Agreement (this “Agreement”) is made as of July 13, 2020 (the “Effective Date”), by and between Sorrento Therapeutics, Inc., a Delaware corporation (“Sorrento”) and ACEA Therapeutics, Inc., a Cayman Island corporation (“ACEA”). Sorrento and ACEA shall be referred to herein individually as a “Party” and collectively as the “Parties”.

WHEREAS, ACEA, together with its respective Affiliates, is the sole and exclusive owner of or has the right to license the Licensed Materials, Licensed Patents and Licensed Know-How (as those terms are defined below);

WHEREAS, Sorrento and ACEA desire to enter into this Agreement whereby ACEA will license to Sorrento the Licensed Patents and Licensed Know-How in the Field and in the Territory in connection with Licensed Products (as those terms are defined below).

NOW, THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, the Parties hereby agree as follows:

ARTICLE I
DEFINITIONS; INTERPRETATION

Section 1.1Definitions. For the purposes of this Agreement, the following terms have the meanings set forth below:

“10-Day VWAP” means the volume weighted average price of the shares of common stock of Sorrento traded on The NASDAQ Stock Market LLC for the ten (10) trading days ending on the date that is three (3) trading days prior to the applicable date of issuance.

“Affiliate” means, as to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, the term “control” of a Person means (a) the power to vote, directly or indirectly, more than fifty percent (50%) of the securities having ordinary voting power for the election of directors of such Person or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.

“Applicable Law” means any federal, state or local statute, law (including the common law), ordinance, rule, code, or regulation that applies in whole or in part to, as the case may be, the obligations or rights of the Parties under this Agreement. Any reference to any federal, state or local statute or law will be deemed also to refer to all rules and regulations promulgated thereunder unless the context requires otherwise.

“Business Day” means any day other than a Saturday, a Sunday or any day on which commercial banks located in San Diego, California are authorized or required to remain closed.

“COGS” means ACEA’s actual labor and material costs, quality assurance and control expenses, and allocable facilities costs, in all cases solely attributable to producing or obtaining the supply of Product Materials, in all cases as determined by ACEA’s consistent application of GAAP, which includes any freight and Third Party logistics or distribution costs calculated in accordance with GAAP, consistently applied.

“Combination Product” means a Royalty-Bearing Product that includes one or more pharmaceutically active ingredients in addition to the Licensed Material.

“Commercially Reasonable Efforts” means efforts and the deployment of a quantity and quality of resources consistent with the exercise of commercially reasonable practices and diligent efforts and reasonable and prudent scientific and business judgment of a similarly situated company in the biopharmaceutical industry that would be applied to other pharmaceutical products of similar potential, characteristics, stage of development and market size.

“Confidential Information” of a Party means any and all information of a confidential or proprietary nature disclosed by such Party to the other Party under this Agreement or under any prior confidentiality agreement entered between both Parties prior to the Effective Date, whether in oral, written, graphic or electronic form.

“Controlled” or “Controls” means, with respect to an item of Know-How or Intellectual Property Rights or Generated Data, or other rights, the right (whether by ownership, license or other authorization) to grant and authorize the licenses or sublicenses or other rights, as applicable, of the scope granted to Sorrento pursuant to the terms and conditions of this Agreement.

“Cover” means, with respect to any subject matter such as a given product, process, method or service, the manufacture, use, performance, sale, offering for sale, importation, exportation or other exploitation of such subject matter would infringe a claim of a patent or patent application at the time thereof absent ownership or license therein or thereto, as applicable. As used in this definition, “infringe” shall include direct and indirect infringement, contributorily infringing or inducing the infringement of such claim. For clarity, with respect to a claim within a patent application, “infringe” refers to activity that would infringe or be covered by such claim if it were contained in an issued patent. “Covered” and “Covering” shall have correlative meanings.

“Data” means any data (whether pre-clinical, clinical data, or otherwise) necessary or useful for the use and development of any Licensed Materials or Licensed Product that is Controlled by ACEA.

“Field” means and includes all fields of use for or in respect of human or animal health, including the diagnosis, treatment, and/or cure of any human or animal disease or disorder.

“First Commercial Sale” means, with respect to a Licensed Product, the first arms-length commercial sale by Sorrento or its Affiliates (or their respective Sublicensee) to a Third Party of a Royalty-Bearing Product for use in the Field after receipt of Regulatory Approval.

“GAAP” means generally accepted accounting principles for financial reporting in the United States.

“Intellectual Property Rights” means and includes all rights of any of the following types anywhere in the world: (a) Patent Rights; (b) (i) copyrights, moral rights, and rights in works of authorship, and (ii) all registrations for any of the foregoing (i); and (c) Know-How (other than those rights subject to clauses (a) or (b) hereof).

“Know-How” means data, trade secrets, inventions (whether patentable or otherwise), discoveries, specifications, copyrights, works of authorship, instructions, processes, compositions, formulae, materials, compounds, methods, protocols, expertise, technical information and any other information of any kind whatsoever (including, but not limited to, any pharmacological, biological, chemical, biochemical, manufacturing, business, and financial information), and other technology applicable to formulations, compositions or products or to their manufacture, development, registration, use or marketing or to methods of assaying or testing them, and all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical and analytical, safety, quality control, manufacturing, preclinical and clinical data relevant to any of the foregoing.

“Licensed Know-How” means and includes all Know-How Controlled by ACEA or any of its Affiliates as of the Effective Date or at any time during the term of this Agreement that (i) relate to the development, manufacture or commercialization of any Licensed Materials or Licensed Product or (ii) otherwise are or would be reasonably necessary or useful to research, develop, promote, commercialize, or exploit (including to make, have made, use, sell, or import) and Licensed Materials or Licensed Products, including all Data.

“Licensed Materials” means the materials set forth or referenced on Exhibit A attached hereto.

“Licensed Patents” means and includes (i) the Patent Rights listed in Exhibit C and (ii) any other Patent Rights that are Controlled by ACEA or any of its Affiliates as of the Effective Date or at any time during the term of this Agreement that (a) would be infringed by the research, development, promotion, commercialization, or exploitation (including making, having made, using, selling, or importing) or manufacture of any Licensed Material, Licensed Know-How, or Licensed Product (or any component thereof) by Sorrento or its Affiliates in the absence of the license or rights granted Sorrento hereunder, (b) otherwise claim or Cover the Licensed Materials.

“Licensed Product” means and includes (i) any composition, product, or component part thereof (a) incorporating, based upon, or using, in whole or in part, any Licensed Know-How and/or any Licensed Materials, or (b) the manufacture, use, sale, offering for sale, importation, exportation or other exploitation of which, in whole or in part, is Covered by one or more Valid Claims within the Licensed Patents, and (ii) any and all services offered in connection or associated therewith.

“Net Sales” means the gross amounts actually received by Sorrento, its Affiliates or Sublicensees (each, a “Selling Party”) for arms-length commercial sales of Royalty-Bearing Products in the Field to a Third Party or to an Affiliate or Sublicensee of Sorrento where such

Affiliate or Sublicensee is an end-user calculated in accordance with GAAP, consistently applied, less the following deductions to the extent included in such gross amounts or otherwise incurred by the Selling Party with respect to the sale of such Royalty-Bearing Product in the Territory: (i) normal and customary rebates, quantity, trade and cash discounts, and other usual and customary discounts, including re-procurement and back-order charges actually allowed and taken; (ii) charge-backs and rebates actually granted to customers, including managed health care organizations or to national, state or local governments, their respective agencies, purchasers or reimbursers (including rebates and payments required to be paid to governmental entities in connection with sales of the Royalty-Bearing Product pursuant to the Omnibus Budget Reconciliation Act of 1990 and similar national, state or local legislation or programs), adjustments arising from consumer discount programs, co-pay assistance programs or other similar programs; (iii) retroactive price reductions, credits or allowances actually granted or made for rejection of or return of previously sold Royalty-Bearing Products, including for recalls or damaged goods; (iv) customary fees paid to distributors, including group purchasing organizations (excluding sales representatives of Sorrento); (v) sales credits accrued in accordance with GAAP, including price protection, shelf stock adjustments, adjustments for uncollectible accounts and other similar and customary deductions which are in accordance with GAAP; (vi) returns of a Royalty-Bearing Product for any reason other than returns covered under (iii) above; (vii) freight, postage, shipping and insurance charges with respect to such Royalty-Bearing Product; and (viii) customary sales taxes, excise taxes, use taxes, import/export duties or other governmental charges actually levied on or measured by the billing amount for such Royalty-Bearing Product, including value-added taxes, in each case to the extent not reimbursed. Each of the foregoing deductions shall be determined as occurred in the ordinary course of business in accordance with GAAP. In no event shall any particular amount identified above be deducted more than once in calculating Net Sales (i.e., no “double counting” of deductions). In no event shall a particular amount identified above to be deducted exceed the gross amount invoiced resulting in a negative royalty.

For clarity, sales of Licensed Product(s) or Licensed Material(s) between Sorrento, its Affiliates and Sublicensees for resale by Sorrento or any of its Affiliates or Sublicensees to a Third Party shall be excluded from Net Sales, but the subsequent resale of a Royalty-Bearing Product to a Third Party, including a bona-fide end user or customer of a Royalty-Bearing Product shall be included in Net Sales. Sales of the Royalty-Bearing Products used for promotional or advertising purposes or used for research or development purposes (including for clinical trials) or for charitable donations shall not be included in Net Sales.

If, on a country-by-country basis, a Royalty-Bearing Product is sold in the form of a Combination Product, the Net Sales for such Royalty-Bearing Product in the Combination Product will be calculated by multiplying the actual Net Sales of such Combination Product by the fraction A/A+B where A is the invoice price or the fair market value of the Royalty-Bearing Product of the same strength in the same period when sold in stand-alone form in the same country of sale as the Combination Product, and B is the fair market value of all of the other active ingredients in the Combination Product sold in the same period in such country.

“New Inventions” means all inventions (and any and all Intellectual Property Rights therein), whether patentable or not, invented in the course of performance of activities contemplated by this Agreement.

“Patent Rights” means in any country, any and all (a) patents (including, but not limited to, any inventor’s certificate, utility model, petty patent and design patent), including any reissue, re-examination, renewal or extension (including any supplementary protection certificate) of any patent, and any confirmation patent or patent of addition based on any patent, in such country; and (b) patent applications, including any continuations, continuations-in-part, divisionals, provisionals, continued prosecution application, substitute applications, and any other patent application that claims priority from any patent.

“Person” means any individual, person, entity, general partnership, limited partnership, limited liability partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association, foreign trust, foreign business organization or a governmental entity.

“Product Materials” means the active pharmaceutical ingredient Abivertinib, capsules and placebos used in the development and manufacture of the Licensed Products.

“Regulatory Approval” means, in any given country, the granting by the Regulatory Authorities in that country of all approvals that are necessary for the manufacturing, distributing, marketing, sale, pricing and reimbursement of a drug product.

“Regulatory Authority” means an agency of any government having the authority to regulate the sale, manufacture, marketing, testing, pricing or payment reimbursement of drugs.

“Regulatory Materials” means regulatory applications, submissions, notifications, communications, correspondence, registrations, Regulatory Approvals or other filings made to, received from or otherwise conducted with a Regulatory Authority in connection with the research, manufacturing, development, or commercialization of a drug product in a particular country or jurisdiction.

“Royalty-Bearing Product” means any Licensed Product in the Field sold by Sorrento, its Sublicensees or its Affiliates to an unrelated Third Party on an arms-length basis or to an Affiliate or a Sublicensee where such Affiliate or Sublicensee is an end-user and that (i) in the absence of this Agreement, the development, manufacture, sale, offer for sale, import or export of which would infringe upon a Valid Claim of any Licensed Patent in the country in which such Licensed Product is sold or (ii) incorporates any Licensed Know-How. For clarity, the regulatory milestone payments due under Section 4.2 shall be triggered even if the applicable Royalty-Bearing Product has not been sold to any party.

“Territory” means worldwide other than the People’s Republic of China.

“Third Party” means any Person other than Sorrento, ACEA and their respective Affiliates.

“Valid Claim” means any issued claim of any unexpired Licensed Patent that has not been permanently revoked, nor held unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction that is unappealable, or unappealed in the time allowed for appeal.

Section 1.2Interpretation and Rules of Construction. Unless otherwise indicated to the contrary herein by the context or use thereof:

(a)a capitalized term has the meaning assigned to it;

(b)when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement;

(c)the headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(d)the words, “herein,” “hereto,” “hereof” and words of similar import refer to this Agreement as a whole and not to any particular Section or paragraph hereof;

(e)references to “including” in this Agreement shall mean “including, without limitation,” whether or not so specified;

(f)references in the singular or to “him,” “her,” “it,” “itself,” or other like references, and references in the plural or the feminine or masculine reference, as the case may be, shall also, when the context so requires, be deemed to include the plural or singular, or the masculine or feminine reference, as the case may be;

(g)references to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder;

(h)all accounting terms used herein and not expressly defined herein shall, except as otherwise noted, have the meanings assigned to such terms in accordance with GAAP;

(i)all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein; and

(j)all references to “$” will be references to United States Dollars, and with respect to any contract, obligation, liability, claim or document that is contemplated by this Agreement, but denominated in currency other than United States Dollars, the amounts described in such contract, obligation, liability, claim or document will be deemed to be converted into United States Dollars for purposes of this Agreement based on the noon buying rate in New York, as certified weekly by the Federal Reserve Bank of New York, in effect as of the applicable date of determination.

ARTICLE II

license Grant

Section 2.1License Grant. ACEA hereby grants to Sorrento an exclusive, transferable (to the extent expressly permitted under Section 10.4 or under the terms of this Agreement or as required under any Applicable Law), royalty-bearing, sublicensable (subject to Section 2.2 hereof),

perpetual (unless terminated in accordance with Section 6.3(a)) and irrevocable (unless terminated in accordance with Section 6.3(a)) license and right, under the Licensed Patents and Licensed Know-How to research, develop, make, have made, use, sell, offer to sell, import, market, promote, improve, provide, perform, support, reproduce, modify, create derivative works of, and to otherwise fully utilize, exploit and commercialize the Licensed Know-How, Licensed Materials and Licensed Products in the Field in the Territory.

Section 2.2Exclusivity. The foregoing license set forth in Section 2.1 shall be exclusive in the Field in the Territory (even as to ACEA, except to the extent reasonably necessary for ACEA to perform its obligations under this Agreement for the benefit of Sorrento, or for ACEA to prosecute, maintain, or enforce any Intellectual Property Rights, or for ACEA to seek or obtain any Regulatory Approvals). ACEA agrees that neither it, nor any of its Affiliates or (sub)licensees, as applicable, will directly or indirectly develop, file for Regulatory Approval with respect to, make, have made, use, sell, offer for sale, import and otherwise commercialize any Licensed Product in the Field in the Territory, except for or through Sorrento and its designees, in accordance with the terms and conditions of this Agreement. For clarity, nothing in this Agreement shall affect ACEA’s right to use, develop, commercialize, license and otherwise exploit its rights in and to the Licensed Patents and Licensed Know-How outside the Territory.

Section 2.3Sublicenses. Sorrento may sublicense the rights granted by ACEA under Section 2.1 above to its Affiliates and to Third Parties (through multiple tiers of sublicensees) without ACEA’s prior written consent, subject to the terms of this Agreement, including the terms under Article IV (each such sublicensee, a “Sublicensee” hereunder). Before granting any such sublicense, Sorrento shall enter into a definitive written sublicense agreement with any such Sublicensee that contains terms and conditions consistent with those set forth herein and a copy of such sublicense agreement shall be provided to ACEA no later than thirty (30) days following the date of execution of such agreement. Notwithstanding Sorrento’s right to sublicense hereunder, as between the Parties, Sorrento shall remain responsible and liable for the acts and/or omissions of each Sublicensee.

Section 2.4Additional Material. In the event ACEA wishes to license or assign to any Third Party any material, compound, molecule, biologic, or chemical that is not a Licensed Material (each such material, compound, molecule, biologic, or chemical, an “Additional Material”) then ACEA will provide Sorrento with written notice of the same and, at Sorrento option, exercisable within fifteen (15) days following its receipt of such notice, ACEA will exclusively negotiate in good faith with Sorrento for a period of not less than thirty (30) days a mutually acceptable agreement to license or assign (as applicable) such Additional Material to Sorrento (which agreement shall be no less favorable to Sorrento than the terms and conditions of this Agreement). If the Parties fail to reach a mutually acceptable agreement following such negotiations in good faith, such period of not less than thirty (30) days may be extended in good faith upon mutual agreement of the Parties to permit the Parties to complete such good faith negotiations; provided, that if the Parties are thereafter unable to reach a mutually acceptable agreement, then ACEA will be free to negotiate with Third Parties for the assignment or license of such Additional Material (in all cases such assignment or license being subject to Sorrento’s rights under this Agreement), provided that prior to executing any agreement with any Third Party for the assignment or license of any Additional Materials, ACEA will disclose such agreement in substantially final form to Sorrento and Sorrento may, at its option, within fifteen (15) days

following its receipt of such agreement, and in place of such Third Party, enter into an agreement with ACEA on substantially similar terms and be assigned or licensed (as applicable) such Additional Material (which agreement shall be no less favorable to Sorrento than the terms and conditions of this Agreement). If Sorrento does not accept the terms and conditions of such agreement within such fifteen (15) day period then ACEA will be free to enter into such agreement with such Third Party and assign or license such Additional Material to such Third Party (in all cases such assignment or license being subject to Sorrento’s rights under this Agreement).

ARTICLE III

DEVELOPMENT & COmmercialization responsibilities; Regulatory Data; Technology TransferS & SUPPLY

Section 3.1Development Responsibilities; Commercialization Responsibilities.

(a)Development and Commercialization Responsibilities.

(i)During the term of this Agreement, Sorrento shall have sole control over all Licensed Products in the Field in the Territory. As between the Parties, following receipt of Regulatory Approval for a Licensed Product, and subject to ACEA’s obligation to supply Product Materials to Sorrento as provided hereunder or pursuant to one or more Supply Agreements (including CMC and clinical development obligations), and further subject to any other obligations of ACEA under this Agreement or in any Supply Agreement, Sorrento shall be solely responsible, at its own expense, for all aspects of the development (including, but not limited to, chemistry manufacturing controls, and clinical development), manufacture, registration and commercialization (including, but not limited to, marketing, promoting, selling, distributing and determining pricing) of such Licensed Product in the Field in the Territory.

(ii)Sorrento shall make Commercially Reasonable Efforts to commercialize the Licensed Products. As between the Parties, and subject to ACEA’s obligation to supply Product Materials to Sorrento as provided hereunder or pursuant to one or more Supply Agreements, and further subject to any other obligations of ACEA under this Agreement or in any Supply Agreement (including CMC and clinical development obligations), Sorrento shall conduct all activities relating to the commercialization of the Licensed Products in the Field within the Territory at its own expense.

(b)General Assistance. ACEA shall use Commercially Reasonable Efforts to provide Sorrento with commercially reasonable assistance, as Sorrento reasonably requires, in connection with development, pre-clinical and clinical testing of the Licensed Products and preparation and filing of all Regulatory Materials and any other documents required in connection with seeking and obtaining Regulatory Approval of the Licensed Products, and all such services shall be provided by ACEA in a commercially reasonable timely manner and, except as expressly provided in this Agreement, at no cost to Sorrento. As between the Parties, Sorrento shall own all Regulatory Materials submitted by Sorrento to the Regulatory Authorities and all Regulatory Approvals resulting from such submissions.

(c)CMC Services. ACEA shall use Commercially Reasonable Efforts to provide to Sorrento with Chemistry, Manufacturing and Controls (CMC) services, including CMC maintenance, CMC improvement and any other CMC-related services, sufficient to facilitate successful achievement of Regulatory Approval in the Territories, including but not limited to U.S., Europe and Japan, for the Licensed Products, including satisfaction of any and all applicable FDA and European Union registration requirements (collectively, the “CMC Services”). Without limiting the foregoing, the Parties will discuss in good faith and agree on a list of CMC Services, to include descriptions of the scope and details of such CMC Services, within a reasonable period of time after the Effective Date, which list will be attached hereto as Exhibit C and shall not be deemed to limit the foregoing obligations set forth in this Section 3.1(c). From time to time, the Parties may update Exhibit C by mutual written agreement. In consideration of the CMC Services and unless ACEA is in breach of its obligations under this Section 3.1(c), Sorrento will pay to ACEA a monthly fee of [...***...] (the “CMC Services Fee”) up to a total, aggregate amount of [...***...] (the “CMC Services Fee Cap”) during the term of this Agreement. For clarity, in the event that Sorrento has paid CMC Service Fees totalling the CMC Services Fee Cap in the aggregate, ACEA shall continue to provide and perform the CMC Services at no additional cost until Sorrento has successfully achieved Regulatory Approval in the U.S. and Europe for the Licensed Products, including satisfaction of any and all applicable FDA and European Union registration requirements

Section 3.2Regulatory Data and Reference. Each Party grants to the other a right to reference, file, or incorporate by reference any of its Regulatory Approvals that are reasonably necessary for such other Party to exercise its rights under this Agreement. In addition, Sorrento will use Commercially Reasonable Efforts to provide ACEA with copies of pre-clinical data, clinical data, and any other data generated by Sorrento in the exercise of its license rights hereunder or otherwise included in the Regulatory Materials that Sorrento submits for Regulatory Approval of the Licensed Products (collectively, “Generated Data”). ACEA may use all Generated Data Controlled by Sorrento in any filing or correspondence that ACEA makes with a Regulatory Authority, subject to the terms of this Agreement. ACEA will at any time upon the reasonable request of Sorrento make available to Sorrento full, accurate, and complete copies of all Regulatory Materials (including all underlying data, information, documents, results, and analyses) that ACEA has generated or otherwise submitted, and generates or otherwise submits after the Effective Date, for Regulatory Approval of Licensed Materials and Sorrento may use and disclose all such Regulatory Materials and underlying data, information, documents, results, and analyses (i) to the extent reasonably necessary or required by a Regulatory Authority in any filing or correspondence that Sorrento makes with a Regulatory Authority, (ii) in the preparation, filing, prosecution, defense, and enforcement of any patents and patent applications, and (iii) subject to its confidentiality obligations under this Agreement, in connection with preparing, publishing, and otherwise presenting research articles, scientific articles, scientific presentations, and the like.

Section 3.3Technology Transfers. Within thirty (30) calendar days of the execution of this Agreement, ACEA shall, at no charge to Sorrento, deliver to Sorrento all Licensed Know-How relating to the research, development, use, manufacture, or other commercialization of Licensed Materials and/or Licensed Products, and provide Sorrento all reasonably requested assistance relating thereto. Thereafter, on a quarterly basis or as otherwise reasonably requested by Sorrento, ACEA will promptly transfer to Sorrento additional Licensed Know-How as is reasonably necessary or useful to enable Sorrento to exercise the rights and licenses granted by

ACEA to Sorrento hereunder. Without limiting the foregoing, at Sorrento’s request, ACEA shall disclose (and provide copies or provide access to make copies, as applicable) to Sorrento or on a need-to-know basis to a Third Party manufacturer selected by Sorrento who is bound by confidentiality obligations that are at least as restrictive as the terms of this Agreement, all Licensed Know-How that is reasonably necessary or useful in the manufacturing (including quality assurance and control testing, filling, labeling, packaging, finishing, storage and shipping, as applicable) of the Licensed Materials and/or Licensed Products, and provide the appropriate authorizations to such Regulatory Authority(ies) allowing Sorrento (or its Third Party manufacturer acting on behalf of Sorrento) the right to reference any and all information, data, filings or materials filed with Regulatory Authorities by or on behalf of ACEA or its permitted contractors to support any filings or applications submitted to a Regulatory Authority with respect to the Licensed Materials and/or Licensed Products in the Territory (together with supporting documentation) (or changes thereto) to permit manufacture by Sorrento or its designee. In connection with the foregoing provisions, ACEA shall make available to Sorrento, at ACEA’s sole expense, such advice of the personnel of ACEA and its contract manufacturers as may reasonably be requested by Sorrento in connection with such transfer, to facilitate the understanding and implementation of such manufacturing related Licensed Know-How to manufacture the Licensed Materials and Licensed Products.

Section 3.4Supply of Product Materials.

(a)Supply. During the term of this Agreement (and throughout the term of the Supply Agreement following the Parties’ execution thereof as contemplated by Section 3.5 below), Sorrento shall have the exclusive right to purchase or otherwise obtain Product Materials from ACEA for use in the Field and in the Territory, all in accordance with the terms and conditions of this Agreement (and, following execution of the Supply Agreement, the terms and conditions thereof). Each Product Material will be sold by ACEA to Sorrento at [...***...] of ACEA’s COGS for such Product Material. For the avoidance of doubt, and notwithstanding anything in this Agreement or the Supply Agreement to the contrary, Sorrento is not obligated or required to purchase from ACEA any Product Materials that are not mutually agreed upon by the Parties (including as to quantities, specifications and price) and Sorrento shall be free to manufacture itself or to otherwise source, purchase or obtain any Product Materials from any Third Party suppliers.

(b)Forecast. During the term of this Agreement, and subject to the terms and conditions hereof, Sorrento shall place Purchase Orders (as defined below) for Product Materials as reasonably needed to satisfy demand for the Product Materials. From time to time, Sorrento may provide ACEA with an initial written forecast of the quantities of the Product Materials estimated in good faith to be required during the succeeding twelve (12) months. Such forecasts, if any, will be non-binding and will be for convenience and planning purposes only. If Sorrento elects to provide such forecasts, Sorrento will prepare and deliver to ACEA a written forecast of the quantities of each Product Material estimated to be required for each month during the succeeding twelve (12) month period (each, a “Forecast”) reflecting Sorrento’s good faith estimate of the Product Materials requirements of Sorrento, its Affiliates and Sublicensees of Product Materials during such period. ACEA shall notify Sorrento as soon as possible, but in any event within five (5) days of receipt of a Forecast, if ACEA is unwilling or believes it will be unable to deliver Product Materials in accordance with such Forecast, and the parties shall work together in good faith to create a new Forecast acceptable to both parties, as soon as possible and without cost or penalty.

(c)Purchase Orders. Sorrento shall order Product Materials by submitting purchase orders to ACEA in writing or through electronic transmission, in a form reasonably acceptable to ACEA (each, a “Purchase Order”). Each Purchase Order must include ordering information such as Product Materials name or other Product Materials identifier, quantity, unit price, requested delivery dates, delivery locations (which shall be Sorrento’s facility(ies) in the United States unless otherwise agreed by ACEA) and any other elements necessary to ensure the timely production and delivery of the Product Materials.

(d)Acceptance of Purchase Orders. Within five (5) calendar days following ACEA’s receipt of each Purchase Order, ACEA will accept or reject such Purchase Order in writing or through electronic transmission. ACEA shall be obligated to accept all Purchase Orders that do not exceed [...***...] of the then-current Forecast. ACEA shall use commercially reasonable efforts to accept any portion of a Purchase Order for amounts greater than [...***...] of the then-current Forecast. For all Purchase Orders that ACEA does not accept, ACEA shall either reject such Purchase Order or provide alternate delivery dates that are reasonably acceptable to Sorrento. Within five (5) calendar days following Sorrento’s receipt of such alternate delivery dates, Sorrento will either: (a) notify ACEA in writing or through electronic transmission that it rejects such dates (in which case the Purchase Order will be deemed cancelled and of no effect); or (b) accept such dates by issuing a confirming Purchase Order, which shall be deemed accepted by ACEA upon receipt. Subject to the foregoing, no Purchase Order shall be binding unless accepted in writing by ACEA.

(e)Delivery. Unless otherwise provided in the Supply Agreement following the Parties’ execution thereof, Product Materials shall be shipped, transported, and delivered in accordance with Sorrento’s reasonable instructions and with at least eighteen (18) months of residual shelf life at time of delivery and the Parties will work in good faith to extend minimum shelf life at delivery to a target of twenty-four (24) months or more. Deliveries of Product Materials shall be made DDP (INCOTERMS 2020) to Sorrento’s designated shipment facility(ies) in the United States as specified in the applicable Purchase Order. Title and risk of loss or of damage to Product Materials shall transfer to Sorrento after delivery of the Product Materials to Sorrento’s place of delivery named in the applicable Purchase Order.

(f)Non-Conforming Orders. Sorrento shall send to ACEA notice in writing or through electronic transmission regarding quantity discrepancies between ordered and delivered quantities with respect to any delivery of Product Materials and ACEA shall promptly deliver replacement Product Materials to remedy the quantity discrepancies. Sorrento shall send to ACEA notice in writing or through electronic transmission regarding Defects (as defined below) with respect to any delivery of Product Materials. In the event that ACEA has delivered any Product Materials that, as delivered, is not new unless otherwise specified in the applicable Purchase Order, is not free and clear of all liens and encumbrances of any kind, deviates from the applicable specifications, was not manufactured in accordance with Applicable Laws or the terms and conditions of this Agreement or any other requirements mutually agreed upon by the Parties (including, following execution of the Supply Agreement, the terms and conditions thereof) (each deviation a “Defect”, and the Product Materials that is the subject of the Defect, a “Defective Product Materials”), ACEA shall, at its sole cost and expense, promptly repair or replace the Defective Product Materials or, if ACEA is unable or unwilling to do so, refund all amounts paid by Sorrento for such Defective Product Materials. Sorrento, or its designated representative, may

inspect the Product Materials to determine whether ACEA has cured the defect. If both parties decide that the Product Materials cannot be reworked or used, ACEA shall arrange, at its sole cost and expense, for all such Defective Product Materials to be picked up and destroyed in accordance with all Applicable Laws and deliver to Sorrento a certificate of destruction signed by an authorized representative of ACEA.

Section 3.5Supply Agreement. No later than six (6) months following the Effective Date of this Agreement, Sorrento and ACEA shall negotiate one or more definitive written supply agreements (each, a “Supply Agreement”) regarding the manufacture and supply of such Licensed Products and/or Licensed Materials in good faith between the Parties with standard terms (in accordance standard industry terms), which Supply Agreement(s) would include reasonable and competitive pricing and also include ongoing technology transfer provisions in the event that ACEA is unable, unwilling, or is delinquent in supplying Licensed Products and/or Licensed Materials as described in this Section 3.5. For clarity, unless and until the Parties execute such Supply Agreement, Sorrento shall have the right to purchase, and ACEA shall supply to Sorrento, Product Materials pursuant to the terms of this Article III.

ARTICLE IV

PAYMENTS

Section 4.1Upfront Payment. Sorrento shall pay to ACEA an up-front, one-time licensee fee equal or equivalent to fifteen million dollars ($15,000,000 USD), payable as follows: (i) a first payment of five million dollars ($5,000,000 USD) within ten (10) Business Days of execution of this Agreement, (ii) a second payment of ten million dollars ($10,000,000 USD) within thirty (30) calendar Days of execution of this Agreement. Such payments may be comprised of (i) cash or (ii) any combination of cash and common stock of Sorrento, in any case as determined by both Sorrento (the “Up-Front Payment”); provided, however, that no more than fifty percent (50%) of any Up-Front Payment will be paid in common stock, whereby the per share price used for calculating the number of shares of common stock of Sorrento issuable to ACEA in the Up-Front Payment shall be the 10-Day VWAP of such shares (the “Up-Front Per Share Price”). In the event Sorrento satisfies all or portion of the Up-Front Payment obligation through the delivery to ACEA of shares of Sorrento common stock (the “Up-Front Payment Shares”), the Up-Front Payment Shares shall be registered and freely tradable within thirty (30) days following issuance. In the event Sorrento satisfies all or portion of the Up-Front Payment obligation through the delivery to ACEA of shares of Sorrento common stock (the “Up-Front Payment Shares”) and the Up-Front Per Share Price is less than the closing price per share of Sorrento’s common stock, as reported on The Nasdaq Stock Market LLC on the date that is six months after the date of issuance of the Up-Front Payment Shares, as applicable (the “Up-Front Payment 6-Month Price”), Sorrento shall reimburse ACEA for the difference in value through (a) the payment of cash, (b) the delivery of additional shares of Sorrento common stock valued at the Up-Front 6-Month Price or (c) a combination of the foregoing, in any case as determined by Sorrento in its sole discretion.

Section 4.2Milestone Payments. During the term of this Agreement, Sorrento shall pay to ACEA the amounts set forth below upon the first achievement of the corresponding milestone event by Sorrento or its Affiliates (or their respective Sublicensees) hereunder with

respect to Royalty-Bearing Products (each, a “Milestone Payment”) and each undisputed Milestone Payment shall be payable within fifteen (15) Business Days of achievement of the corresponding milestone events. For clarity, each Milestone Payment under this Section 4.2 shall be payable only once for the first achievement by Sorrento or its Affiliates (or their respective Sublicensee) of such milestone event and for each of the regulatory milestones from (A) to (D) as listed below with respect to the first Royalty-Bearing Product to achieve such milestone. In addition, for clarity, Sorrento shall pay each milestone based on Net Sales from (E) to (G) as listed in the table immediately below on the first time that the aggregate of all Net Sales of all Royalty-Bearing Products by Sorrento, its Affiliates (or their respective Sublicensee) equals or exceeds the applicable threshold for such milestone. Notwithstanding anything to the contrary contained herein, each Milestone Payment may be comprised of (i) cash or (ii) any combination of cash and common stock of Sorrento in any case as determined by Sorrento; provided that no more than fifty percent (50%) of any Milestone Payment will be paid in common stock. In the event Sorrento satisfies all or portion of any Milestone Payment obligation through the delivery to ACEA of shares of Sorrento common stock (with respect to each such Milestone Payment, the “Milestone Payment Shares”), the per share price used for calculating the number of Milestone Payment Shares issued shall be the 10-Day VWAP of such shares (the “Milestone Per Share Price”) and the Milestone Payment Shares shall be registered and freely tradable within thirty (30) days following issuance. In the event Sorrento satisfies all or portion of the Milestone Payment obligation through the delivery to ACEA of Milestone Payment Shares and the Milestone Per Share Price is less than the closing price per share of Sorrento’s common stock, as reported on The Nasdaq Stock Market LLC on the date that is six months after the date of issuance of the Milestone Payment Shares, as applicable (the “Milestone Payment 6-Month Price”), Sorrento shall reimburse ACEA for the difference in value through (a) the payment of cash, (b) the delivery of additional shares of Sorrento common stock valued at the Milestone Payment 6-Month Price or (c) a combination of the foregoing, in any case as determined by Sorrento in its sole discretion.


Milestone Event	Milestone Payment

(A) Earliest to occur of: (1) FDA acceptance of [...*...] by Sorrento or its Affiliate (or their respective Sublicensee) for a Royalty-Bearing Product or (2) FDA issuance of [...*...] by Sorrento or its Affiliate (or their respective Sublicensee)	[...*...] dollars ($[...*...] USD)
(B) First Regulatory Approval in [...***...] of a Royalty-Bearing Product submitted by Sorrento or its Affiliate (or their respective Sublicensee)	[...*...] dollars ($[...*...] USD)


(C) First Regulatory Approval in [...***...] of a Royalty-Bearing Product submitted by Sorrento or its Affiliate (or their respective Sublicensee)	[...*...] dollars ($[...*...] USD)
(D) First Regulatory Approval in [...***...] of a Royalty-Bearing Product submitted by Sorrento or its Affiliate (or their respective Sublicensee)	[...*...] dollars ($[...*...] USD)
(E) Total, aggregate Net Sales of all Royalty-Bearing Products in excess of [...*...] dollars ($[...*...] USD)	[...*...] dollars ($[...*...] USD)
(F) Total, aggregate Net Sales of all Royalty-Bearing Products in excess of [...*...] dollars ($[...*...] USD)	[...*...] dollars ($[...*...] USD)
(G) Total, aggregate Net Sales of all Royalty-Bearing Products in excess of [...*...] dollars ($[...*...] USD)	[...*...] dollars ($[...*...] USD)

Section 4.3Royalty Payments.

(a)Royalties. During the applicable Royalty Term (as defined below) and subject to the reductions set forth in Section 4.3(c) below, on a Royalty-Bearing Product-by-Royalty-Bearing Product and country-by-country basis, Sorrento shall pay to ACEA royalties on Net Sales during the applicable Royalty Term in accordance with the tiered royalty rates set forth in the table below, which tiered royalty rates shall be based on aggregate Net Sales of all Royalty-Bearing Products (each such royalty, a “Royalty”).


Annual Net Sales	Royalty Amount

Annual Net Sales of [...*...] dollars ($[...*...] USD) in the applicable year	[...*...] percent ([...*...]%) of Net Sales
Annual Net Sales [...*...] dollars million dollars ($[...*...] USD) in the applicable year	[...*...] percent ([......]%) of Net Sales on Net Sales [......] dollars [......] dollars ($[......] USD) for the given year and [......] percent ([......]%) of Net Sales on Net Sales [......] dollars [......] dollars ($[...*...] USD) for the given year

(b)Royalty Term. The Royalties under Section 4.3(a) will be payable on a quarterly basis due within thirty (30) days after the end of each calendar quarter for Net Sales of the applicable Royalty-Bearing Products in the applicable countries in the Territory during the applicable Royalty Term. Sorrento shall pay the Royalties on a Royalty-Bearing Product-by-Royalty-Bearing Product and country-by-country basis commencing on the First Commercial Sale of such Royalty-Bearing Product in such country in the Territory until the later of: (i) the expiration of the last-to-expire Valid Claim that Covers such Royalty-Bearing Product in such country in the Territory and (ii) ten (10) years after the First Commercial Sale of such Royalty-Bearing Product (each, the “Royalty Term”). Within twenty (20) days following the end of a calendar quarter during the applicable Royalty Term, Sorrento shall provide ACEA a report containing the following information for the applicable calendar quarter on a Royalty-Bearing Product-by-Royalty-Bearing Product basis: (i) the amount of gross sales of such Royalty-Bearing Product in the applicable countries in the Territory; (ii) an itemized calculation of Net Sales in the applicable countries in the Territory showing actual sales prices and deductions provided for in the definition of Net Sales; and (iii) a calculation of the royalty payment due on such Net Sales. Within ten (10) days of the delivery of the applicable quarterly report, Sorrento shall pay in Dollars all undisputed amounts due to ACEA pursuant to Section 4.3.

(c)Royalty Reductions.

(i)No Valid Claim. If, on a Royalty-Bearing Product-by- Royalty-Bearing Product and country-by-country basis, such Royalty-Bearing Product is not or is no longer Covered by a Valid Claim of any Licensed Patent in such country in the Territory, then the royalty rate that would otherwise apply to Net Sales of such Royalty-Bearing Product in such country in the Territory under Section 4.3(a) will be reduced by [...***...] percent ([...***...]%) for the remainder of the term of this Agreement.

(ii)Third Party Payments. If Sorrento is required to make royalty payments to one or more Third Parties on a Royalty-Bearing Product in consideration for a license under such Third Party’s Intellectual Property Rights (“Third Party Payments”), then Sorrento may credit against the royalty payments payable to ACEA pursuant to this Section 4.3 with respect to such Royalty-Bearing Product up to [...***...] percent ([...***...]%) of Third Party Payments owed by Sorrento with respect to such Royalty-Bearing Product; provided that in no event will the applicable running royalty rate for a Royalty-Bearing Product Covered by a Valid Claim be reduced, pursuant to this Section 4.3(c)(ii), to less than [...***...] percent ([...***...]%) of such applicable rate. Sorrento will be entitled to carry forward to future calendar quarters any amounts with respect to which Sorrento would have been entitled to make a deduction pursuant to this Section 4.3(c)(ii) but for such maximum reduction.

Section 4.4Right to Purchase Shares. At any time until the earlier of twelve (12) months following the effective date of this Agreement or the initial closing of ACEA’s next equity financing transaction in which ACEA receives aggregate gross proceeds of at least [...***...] (the “Next Financing”), Sorrento will have the right, in its sole discretion, to purchase up to the greater of [...***...] percent ([...***...]%) or [...***...] dollars ($[...***...] USD) in shares of preferred stock of ACEA at a pre-money valuation of ACEA of $[...***...] (with rights, preferences and privileges substantially similar to ACEA’s existing Series E preferred stock or the rights, preferences and privileges substantially similar to those provided to any other investor in the Next Financing, in

each case as determined by Sorrento in its sole discretion). ACEA shall provide Sorrento at least twenty (20) calendar days advance written notice of the first closing of the Next Financing, which notice shall describe all material terms of such Next Financing.

Section 4.5Records and Audit Rights. Sorrento will maintain complete and accurate records in sufficient detail to permit ACEA to confirm the accuracy of Sorrento’s calculations of payments owed under this Agreement. Such records shall be available for audit and inspection during regular business hours for a period of three (3) years from the end of the calendar quarter to which they pertain, and not more often than once per calendar year, unless the audit reveals non-compliance or underpayment. ACEA shall provide Sorrento with thirty (30) calendar days’ prior written notice of such audit. Audits and inspections may be conducted only by an internationally recognized certified public accounting firm mutually agreed upon by Sorrento and ACEA, and who agrees to be bound by a reasonable confidentiality agreement. The mutually agreed upon certified public accounting firm may examine Sorrento’s records relating to this Agreement for the sole purpose of verifying the accuracy of the aforesaid calculations. With regard to such calculations, the accountants shall disclose to ACEA, with a copy to Sorrento, only whether such calculations are correct or incorrect, and the amount of discrepancy, if any. Once examined, such books and records will no longer be subject to further examination by ACEA under this Section 4.5. Any amounts shown to have been underpaid shall be paid by Sorrento to ACEA and any amounts shown to have been overpaid shall be refunded by ACEA to Sorrento, in each case, within forty-five (45) calendar days from the accountant’s report. ACEA shall bear the full cost of such audit unless such audit discloses an underpayment of more than [...***...] percent ([...***...]%) of the amount actually owed during the applicable calendar quarter, in which case Sorrento shall reimburse ACEA for its reasonable Third Party out-of-pocket costs incurred for such audit.

Section 4.6Taxes. Each Party shall be responsible for its own tax liabilities arising under this Agreement. Subject to this Section 4.6, ACEA shall be liable for all income and other taxes (including interest) (“Taxes”) imposed upon any payments or other consideration made by Sorrento to ACEA under this Agreement (“Agreement Payments”). If Applicable Laws require the withholding of Taxes, Sorrento shall make withholding payments in a timely manner and shall subtract the amount thereof from the Agreement Payments. Sorrento shall promptly (as available) submit to ACEA appropriate proof of payment of the withheld Taxes as well as the official receipts within a reasonable period of time. Notwithstanding the foregoing, if as a result of ACEA changing its domicile or other circumstances outside of Sorrento’s control, additional Taxes become due that would not have otherwise been due hereunder with respect to Agreement Payments, ACEA shall be responsible for all such additional Taxes.

Section 4.7Payment Method; Late Payments. Except as otherwise provided herein, all payments due hereunder to ACEA shall be made in U.S. dollars by wire transfer of immediately available funds into an account designated by ACEA. If ACEA does not receive payment of any sum due to it on or before the due date, simple interest shall thereafter accrue on the sum due until the date of payment by Sorrento at the per annum rate of [...***...] percent ([...***...]%) over the then-current prime rate reported in The Wall Street Journal or the maximum rate allowable by Applicable Law, whichever is lower.

ARTICLE V

INTELLECTUAL PROPERTY OWNERSHIP; PATENT PROSECUTION AND ENFORCEMENT

Section 5.1Background IP. Subject to Section 5.2 below, as between the Parties, ACEA will exclusively own and retain exclusive ownership of all right, title, and interest in and to all Know-How and Intellectual Property Rights (i) owned by ACEA (or its Affiliates) prior to the Effective Date, (ii) created, conceived, developed, invented, or otherwise acquired by ACEA (or its Affiliates) during the term of this Agreement but that is developed outside of the activities outlined in this Agreement and which do not constitute Sorrento IP pursuant to Section 5.2 below, and (iii) all updates, enhancements, modifications, derivatives, new versions, revisions, and improvements to any of the items outlined in (i) and (ii) of this Section 5.1 that are created, conceived, developed, invented, or otherwise acquired solely by ACEA (or its Affiliates). Subject to Section 5.2 below, as between the Parties, Sorrento will exclusively own and retain exclusive ownership of all right, title, and interest in and to all Know-How and Intellectual Property Rights (a) owned by Sorrento (or its Affiliates), as applicable, prior to the Effective Date or (b) created, conceived, developed, invented, or otherwise acquired by Sorrento (or its Affiliates) during the term of this Agreement, including, all updates, enhancements, modifications, derivatives, new versions, revisions, and improvements to any of the foregoing items that are created, conceived, developed, invented, or otherwise acquired, whether solely by Sorrento (or its Affiliates) or jointly by Sorrento (and/or its Affiliates) on the one hand, and ACEA (or any of its Affiliates), on the other hand, by Sorrento (or any of its Affiliates). The Know-How and Intellectual Property Rights subject to this Section 5.1 is collectively referred to herein as “Background IP”.

Section 5.2New Inventions. As between the Parties, title to all New Inventions invented (a) solely by ACEA shall be owned by ACEA (“ACEA IP”) and licensed to Sorrento pursuant to Section 2.1 to the extent such New Inventions constitute Licensed Patents, Licensed Know-How or are otherwise reasonably necessary or useful for the development and commercialization of the Licensed Materials and/or Licensed Products; (b) solely by Sorrento shall be owned by Sorrento (“Sorrento IP”); and (c) jointly invented by (i) one or more employees or agents of ACEA or its Affiliates or other persons acting under its authority on the one hand and (ii) one or more employees or agents of Sorrento or its Affiliates or other persons acting under its authority on the other hand, shall be jointly owned by both Parties (“Joint IP”) and ACEA’s right, title and interest in and to such Joint IP shall be licensed to Sorrento pursuant to Section 2.1 only to the extent such Joint IP qualifies as Licensed Patents or Licensed Know-How under this Agreement; provided, for clarity, the exclusive rights and licenses granted to Sorrento under ACEA’s right, title and interest in and to such Joint IP shall not result in additional consideration due to ACEA other than as provided under this Agreement. Inventorship shall be determined by applying the patent laws of the United States, including, in the case of New Inventions jointly invented outside of the United States, as if such New Inventions were invented in the United States. Subject to the rights and licenses granted under this Agreement (including the exclusive rights and licenses granted to Sorrento pursuant to Section 2), each Party shall have the right to practice and use, grant licenses to practice and use, any Joint IP without the other Party’s consent and has no duty to account to the other Party for such practice, use and license. ACEA will keep Sorrento regularly informed of the development of ACEA IP and will provide to Sorrento all Know-How included therein, including upon request by Sorrento. ACEA, on behalf of itself and its Affiliates,

hereby irrevocably and unconditionally assigns, and agrees to assign and to cause its Affiliates to assign, to Sorrento all right, title and interest of ACEA and its Affiliates, if any, in and to the Sorrento IP to be owned by Sorrento pursuant to Section 5.1. Sorrento hereby grants to ACEA, during the term of this Agreement, a non-exclusive, sub-licensable, non-transferable (except to an Affiliate or permitted assignee), fully paid-up, royalty free, worldwide license, under Sorrento’s rights in and to the Sorrento IP, solely to fulfil its obligations under this Agreement.

Section 5.3Prosecution. ACEA shall have the sole right (but not the obligation), to control the filing and prosecution, at its expense, and using patent counsel reasonably acceptable to Sorrento, any patents and patent applications for the Licensed Intellectual Property Rights and ACEA IP; provided, however, that ACEA shall (i) keep Sorrento reasonably informed with respect to the status of such matters, (ii) provide copies of all material submissions to any patent office related to such matters, and (iii) give Sorrento an opportunity to review and comment on the nature and text of any new or pending patent applications and consider in good faith any comments from Sorrento regarding steps that might be taken to strengthen patent protection with respect to any such patent applications and shall conduct discussions with Sorrento on a reasonable basis regarding the patent prosecution strategy for the Licensed Intellectual Property Rights and ACEA IP. If ACEA elects not to file or prosecute any patents or patent applications for the Licensed Intellectual Property Rights or ACEA IP, Sorrento shall have the right, at its expense, to file and prosecute such patents and patent applications using patent counsel of its choice. ACEA will pay all maintenance, annuity, and like fees and amounts to maintain all Licensed Intellectual Property Rights and ACEA IP as subsisting and in full force and effect. Without limiting the foregoing, ACEA shall promptly (but not less than ninety (90) days prior to the due date for the next applicable filing or payment) give notice to Sorrento of the grant, lapse, revocation, surrender, invalidation or abandonment of any Licensed Patents, and in the event of any lapse, revocation, surrender, invalidation or abandonment of any Licensed Patent in any country, Sorrento may by notice to ACEA assume control of the prosecution and maintenance of such Licensed Patents in such country at ACEA’s expense. In the event that Sorrento is permitted to file, prosecute or maintain any Licensed Patents pursuant to the foregoing provisions of this Section 5.3, ACEA shall provide to Sorrento all reasonable assistance and cooperation in such efforts, including providing any necessary powers of attorney and assignments of employees of ACEA and its Affiliates and Sublicensees and Third Party contractors and executing any other required documents or instruments for such activities. Sorrento shall have the right to control the filing, prosecution and maintenance, at its expense, and using patent counsel of its choice, any patents and patent applications arising out of or relating to Sorrento IP and any Background IP of Sorrento.

Section 5.4Patent Enforcement.

(a)By Sorrento. Sorrento shall have the first right (but not the obligation) at its expense to enforce the Licensed Patents in the Field in the Territory in connection with matters and/or products relating to the Licensed Products, and to settle any claims in connection with such enforcement (a “Sorrento Enforcement Action”). All Sorrento Enforcement Actions shall be entirely under Sorrento’s direction and control; Sorrento shall have sole responsibility for determining the strategy of Sorrento Enforcement Actions and filing all papers in connection therewith; provided that Sorrento will give ACEA an opportunity to review and comment on the nature and the strategy of the Sorrento Enforcement Actions and consider in good faith any comments from ACEA regarding the same. Sorrento shall keep ACEA reasonably informed of the

progress of any such Sorrento Enforcement Action, and ACEA shall have the right to participate in the Sorrento Enforcement Action with counsel of its own choice at its own expense. In any event, ACEA shall reasonably cooperate with Sorrento in any Sorrento Enforcement Action, shall provide Sorrento with such information as Sorrento reasonably requests to facilitate Sorrento’s enforcement of the Sorrento Enforcement Action, and shall join as a named party in any Sorrento Enforcement Action at the request of Sorrento. Any recovery received as a result of any Sorrento Enforcement Action shall be used first to reimburse the Parties for the costs and expenses (including attorneys’ and professional fees) incurred in connection with such Sorrento Enforcement Action (and not previously reimbursed). If such recovery is insufficient to cover all such costs and expenses of both Parties, it shall be shared in proportion to the total of such costs and expenses incurred by each Party. If, after such reimbursement, any funds remain from such recovery, then such remainder amount of the recovery shall be retained by Sorrento and treated as a sale of a Royalty-Bearing Product, if applicable, for purposes of calculating Net Sales and any royalties payable to ACEA hereunder. In no event shall Sorrento admit the invalidity of any Licensed Patent without the prior written consent of ACEA.

(b)By ACEA. ACEA may, solely upon receiving Sorrento’s prior written consent, and at ACEA’s sole expense, enforce the Licensed Patents outside of the Field and Joint IP outside of the Field or outside of the Territory and the Licensed Patents inside the Territory if Sorrento refuses to enforce or fails to enforce pursuant to Section 5.4(a) (an “ACEA Enforcement Action”). ACEA will have the right to control any ACEA Enforcement Action, provided that ACEA will give Sorrento an opportunity to review and comment on the nature and strategy of the ACEA Enforcement Action and consider in good faith any comments from Sorrento regarding the same. In addition, ACEA shall keep Sorrento reasonably informed of the progress of any ACEA Enforcement Action, and Sorrento shall have the right to participate in any ACEA Enforcement Action with counsel of their own choice at their own expense. Any recovery received as a result of any ACEA Enforcement Action shall be used first to reimburse the Parties for the costs and expenses (including attorneys’ and professional fees) incurred in connection with such ACEA Enforcement Action (and not previously reimbursed). If such recovery is insufficient to cover all such costs and expenses of both Parties, it shall be shared in proportion to the total of such costs and expenses incurred by each Party. If, after such reimbursement, any funds remain from such recovery, then such remainder amount of the recovery shall be retained by ACEA. For the avoidance of doubt, ACEA may not threaten or bring any action to enforce the Licensed Patents without first obtaining Sorrento’s written consent to do so. Notwithstanding the foregoing, in no event shall ACEA (i) admit the invalidity of, or after exercising its right to bring and control an action under this Section 5.4(b), fail to defend the validity of, any Licensed Patents without Sorrento’s prior written consent, or (ii) settle any ACEA Enforcement Action under this Section 5.4(b) without the prior written consent of Sorrento, which consent, in each instance, shall not be unreasonably withheld, conditioned or delayed.

Section 5.5Patent Defense. ACEA will defend any action or suit, or other inter partes proceeding, brought by a Third Party that challenges or concerns the patentability, validity, enforceability, priority, title, or scope of the Licensed Patents, in all cases at ACEA’s sole expense. Sorrento shall have the right to participate in all such defensive activities and shall reasonably cooperate with ACEA during such proceeding at ACEA’s sole cost and expense. Notwithstanding the foregoing, in no event shall ACEA admit the invalidity of or fail to defend the validity of, any Licensed Patents without Sorrento’s prior written consent.

Section 5.6Defense of Infringement Claims. In the event that a claim is brought against either Party alleging the infringement, violation or misappropriation of any Third Party Intellectual Property Right based on the manufacture, use, sale or importation of the Licensed Materials or Licensed Products, the Parties shall promptly meet to discuss the defense of such claim, and the Parties shall, as appropriate, enter into a joint defense agreement with respect to the common interest privilege protecting communications regarding such claim in a form reasonably acceptable to the Parties. The Party against which such claim is brought shall have the right to control the defense of such claim and shall keep the other Party reasonably informed with respect thereto; provided, ACEA or Sorrento shall not settle any patent infringement litigation under this Section 5.6 in a manner that diminishes the rights and interests of the other Party without the other Party’s prior written consent.

Section 5.7Patent Marking. At Sorrento’s discretion subject to its reasonable business judgement, Sorrento shall, and shall require its Affiliates and Sublicensees, to mark Licensed Products developed, manufactured or sold hereunder in accordance with the Applicable Law.

ARTICLE VI

TERM AND TERMINATION

Section 6.1Term. This Agreement shall become effective as of the Effective Date, and will continue in full force and effect unless and until (i) mutually terminated in writing by the Parties or (ii) otherwise terminated pursuant to and in accordance with the terms of this Agreement.

Section 6.2Termination.

(a)Termination for Material Breach.

(i)By Sorrento. If ACEA commits a material breach of this Agreement, Sorrento may provide to ACEA a written notice specifying the nature of the breach, requiring ACEA to make good or otherwise cure such breach, and stating its intention to terminate this Agreement if such breach is not cured. If such breach is not cured within ninety (90) days after the receipt of such notice, then subject to Section 6.2(a)(iii), Sorrento shall be entitled, without prejudice to any of its other rights conferred under this Agreement, and in addition to any other remedies available to it by law or in equity, to terminate this Agreement by written notice to ACEA.

(ii)By ACEA. If Sorrento (1) commits a material breach of its payment obligations to ACEA under this Agreement, (2) commits a material breach of its obligations under this Agreement with respect to the use of Commercially Reasonable Efforts for the development and commercialization of Licensed Products, or (3) permanently ceases development of all Licensed Products, ACEA may provide to Sorrento a written notice specifying the nature of the breach, providing evidence of such breach (if any) reasonably sufficient for Sorrento to understand the nature and basis of such claim, requiring Sorrento to make good or otherwise cure such breach, and stating its intention to terminate this Agreement if such breach is not cured. If (A) such breach is not cured within a reasonable period of time (of at least ninety (90) days) after the receipt of such notice, and (B), with respect to item (2) above, only if Sorrento does not resume the use of

Commercially Reasonable Efforts within ninety (90) days) or provide to ACEA within such 90-days period a written plan detailing the efforts to be expended by Sorrento to resume the use of Commercially Reasonable Efforts within a reasonable period of time thereafter, then subject to Section 6.2(a)(iii), ACEA shall be entitled, without prejudice to any of its other rights conferred under this Agreement, and in addition to any other remedies available to it by law or in equity, to terminate this Agreement by written notice to Sorrento.

(iii)If the alleged breaching Party disputes in good faith the existence or materiality of a breach specified in a notice provided by the other Party in accordance with Section 6.2(a)(i) or 6.2(a)(ii), and such alleged breaching Party provides the other Party notice of such dispute within fifteen (15) days of the date of the notice provided by the other Party in accordance with Section 6.2(a) and, with respect to payment, such alleged breaching Party pays any portion of such payment not in dispute, then the non-breaching Party will not have the right to terminate this Agreement under Section 6.2(a) unless and until (i) the arbitrators, in accordance with Section 6.2(a)(iv), have determined that the alleged breaching Party has materially breached this Agreement (an “Arbitral Decision”), and (ii) the alleged breaching Party has failed to cure such breach within ninety (90) days following such Arbitral Decision (except (1) to the extent such breach involves the failure to make a payment when due, which breach must be cured within fifteen (15) days following such an Arbitral Decision and (2) as otherwise provided in Section 6.2(a)(ii)(B)). The Arbitral Decision will include a description of what is required to cure such breach. If the arbitrators determine that a Party should be regarded as the prevailing Party, then such prevailing Party in such arbitration shall be reimbursed by the other Party for all of such prevailing Party’s expenses related to such arbitration proceeding. It is understood and agreed that during the pendency of such dispute, all of the terms and conditions of this Agreement will remain in effect.

(iv)The Arbitral Decision shall be reached, and the arbitration proceeding shall be conducted, in accordance with the simplified process procedures of the American Arbitration Association. The number of arbitrators shall be three, one of whom shall be appointed by each of the parties and the third of whom shall be selected by mutual agreement of the co-arbitrators with the input of the parties, within thirty (30) days of the selection of the second arbitrator and thereafter by the American Arbitration Association. The seat of the arbitration will be New York, New York. The arbitration award rendered by the arbitrators shall be final and binding on the parties. Judgment on the award may be entered in any court having jurisdiction thereof.

(v)If the breach in dispute relates to any rights that have been sublicensed by Sorrento and such breach is subject to any such sublicense agreement, the dispute resolution provisions of such sublicense agreement shall govern as to any conduct of such Sublicensee and termination under this Section 6.2 for such breach shall be stayed pending resolution of any such dispute resolution provisions of such sublicense.

(vi)As to termination by ACEA, the Parties agree that termination pursuant to Section 6.2(a)(ii) is a remedy to be invoked only if the breach cannot be adequately remedied through a combination of specific performance and the payment of money damages.

(b)Termination for Convenience by Sorrento. After Sorrento has fulfilled its upfront payment obligations under Section 4.1 (the payments under which are non-refundable), Sorrento may terminate this Agreement for no reason or for any reasons upon three (3) months’ written notice to ACEA.

All remedies set forth herein shall be cumulative and in addition to any other remedies such Party may have at law or in equity.

Section 6.3Effects of Termination or Expiration.

(a)By ACEA for Cause or by Sorrento without Cause and Mutual Termination. Termination of this Agreement (i) by ACEA under Section 6.2(a)(ii); (ii) by Sorrento for convenience under Section 6.2(b) will result in termination of Sorrento’s license under Section 2.1; or (iii) by mutual termination prior to the expiration of the Agreement, which license shall automatically revert to ACEA; provided, however, that Sorrento and its Sublicensees may, for a period not to exceed one (1) year, finish manufacturing and sell any inventories of Licensed Products existing (including in process inventories or inventories subject to contractual manufacturing or purchase commitments) on the date of termination, provided Sorrento shall continue to fulfill all of its respective payment obligations under Article IV of this Agreement during this one-year period.

(b)By Sorrento for Cause. Termination of this Agreement by Sorrento under Section 6.2(a) for material breach of this Agreement by ACEA, will result in the license in Section 2.1 becoming fully paid, royalty-free and irrevocable and the payment obligations of Sorrento under Sections 4.2 and 4.3 shall automatically terminate effective as of such termination date such that no additional or future Milestone Payments or Royalties shall accrue or become due or payable by Sorrento; provided, Sorrento shall timely fulfill all of its respective payment obligations under Article IV of this Agreement incurred prior to the date of such termination by Sorrento and the license granted hereunder shall be the sole and exclusive financial remedy with respect to any damages caused by such material breach of ACEA; provided, for clarity, nothing contained in this Section 6.3(b) shall be deemed to limit or restrict ACEA’s obligations under Section 8.1 with respect to Third Party Claims.

(c)Expiration. Without limiting 6.3(b), upon expiration of the applicable Royalty Term with respect to a particular country in the Territory all rights and licenses granted to Sorrento under this Agreement with respect to such country will become fully paid, irrevocable, and royalty free.

(d)Termination or expiration of this Agreement will not affect either Party’s rights in its Background IP.

Section 6.4Survival. Termination or expiration of this Agreement shall not affect any rights or obligations of the Parties under this Agreement that have accrued prior to the date of termination or expiration. Notwithstanding anything to the contrary, the following provisions shall survive any expiration or termination of this Agreement: Article I, Article IV, Article V, Article VI and Article VIII, and Article X.

ARTICLE VII

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 7.1By All Parties. Each Party represents, warrants and covenants to the other that:

(a)it is duly organized and validly existing under the laws of its state of formation and has full authority to enter into this Agreement;

(b)the execution and performance of this Agreement does not conflict with any other agreement, oral or written, to which it is a Party;

(c)it will perform its obligations under this Agreement in compliance with all Applicable Laws; and

(d)this Agreement is its legal, valid and binding obligation, enforceable against such Party in accordance with the terms and conditions hereof, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies .

Section 7.2By ACEA. ACEA further represents, warrants and covenants to Sorrento that:

(a)The Licensed Patents and Licensed Know-How are Controlled by ACEA, are free and clear of all liens, claims, security interests, and encumbrances of any kind, and have not and will not be licensed or subject to any agreements, understandings, contracts, grants, covenants, or options that could conflict with the rights and licenses granted to Sorrento hereunder in all material respects.

(b)ACEA (i) has the full right and authority to grant the rights and licenses under this Agreement and (ii) to the knowledge of ACEA, has the right and authority to use all Licensed Materials and all Licensed Know-How.

(c)The Licensed Patents represent all patents and patent applications that ACEA or its Affiliates owns or Controls as of the Effective Date which would be infringed by the research, development, promotion, commercialization, or exploitation of the Licensed Products.

(d)No claim or litigation has been brought, asserted or threatened against ACEA or its Affiliates with respect any Licensed Patent by any Person (i) alleging the invalidity, misuse, unregisterability, unenforceability or non-infringement of any of the Licensed Patents, or (ii) challenging ACEA’s or any of its Affiliates Control of the Licensed Patents or with respect to owned Licensed Patents, making any adverse claim of ownership or inventorship thereof.

(e)As of the Effective Date, the Licensed Patents are valid and subsisting, and are not subject to any pending or threatened opposition, interference or litigation proceedings.

(f)To the best of ACEA’s knowledge, after due inquiry and including the knowledge that ACEA would have had following such due inquiry or which is imputed by Applicable Law, the development, manufacture or commercialization of any Licensed Materials or Licensed Product and the use of the Licensed Intellectual Property Rights pursuant to the provisions of this Agreement and as contemplated herein would not infringe the Patent Rights, or misappropriate the Know-How, of any Third Party.

(g)ACEA has not been a party to any agreement with the United States federal government or an agency thereof pursuant to which the United States federal government or such agency provided funding for the development of the Licensed Materials, and the inventions claimed or covered by the Licensed Patents (A) were not conceived, discovered, developed or otherwise made in connection with any research activities funded, in whole or in part, by the federal government of the United States or any agency thereof, (B) are not a “subject invention” as that term is described in 35 U.S.C. Section 201(e) and (C) are not otherwise subject to the provisions of the Patent and Trademark Law Amendments Act of 1980, as amended, codified at 35 U.S.C. §§ 200-212, as amended, as well as any regulations promulgated pursuant thereto, including in 37 C.F.R. Part 401.

(h)There is no action or other proceeding filed nor threatened against ACEA of any of its Affiliates alleging that the research, development, manufacture or commercialization of any Licensed Materials or use of Licensed Know-How as contemplated under this Agreement, violates, infringes, constitutes misappropriation or otherwise conflicts with or interferes with or would violate, infringe, constitute a misappropriation or otherwise conflict or interfere with, any intellectual property or proprietary right of any Third Party.

(i)Neither ACEA nor any of its Affiliates, nor any of their respective officers, employees or agents, has (i) committed an act, (ii) made a statement or (iii) failed to act or make a statement that, in any case ((i), (ii) (iii)), that (x) would be or create an untrue statement of material fact or fraudulent statement to the FDA or any other Regulatory Authority solely with respect to the development, manufacture or commercialization of the Licensed Materials, or (y) would reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery and Illegal Gratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto or any analogous laws or policies in the Territory, with respect the development, manufacture or commercialization of the Licensed Materials.

(j)Neither ACEA nor any of its employees, directors, officers or subcontractors performing or involved with the development or commercialization of the Licensed Materials or Licensed Product or its performance under this Agreement have been “debarred” or excluded from reimbursement by the FDA or any other Regulatory Authority, nor have debarment or exclusion proceedings against ACEA or any of its employees or subcontractors been commenced; and

(k)ACEA and its Affiliates has or will obtain from all other (sub)licensees, contractors, and employees who conduct activities with respect to the Licensed Materials or Licensed Product, an assignment or exclusive license, including the right to grant and authorize sublicenses, of or under any and all New Inventions made by such (sub)licensee, contractor or employee.

(l)To ACEA’s knowledge as of the Effective Date, no Know-How, Intellectual Property Right or other information related to, or reasonably necessary or useful for the use and development of, Licensed Materials or Licensed Product exists that is material to the activities contemplated hereunder and has not been disclosed by ACEA to Sorrento.

ACEA will provide Sorrento with prompt written notice if any of the representations and warranties in this Section 7.2 becomes untrue.

Section 7.3General Disclaimer. EACH PARTY AGREES AND ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY SUPPLY AGREEMENTS ENTERED INTO BY THE PARTIES, NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, IMPLIED OR STATUTORY WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS ALL SUCH REPRESENTATIONS AND WARRANTIES, IMPLIED OR STATUTORY, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR THE LIKE, OR ARISING FROM COURSE OF PERFORMANCE.

ARTICLE VIII

indemnity; Insurance; Liability

Section 8.1By ACEA. ACEA hereby agrees, at its sole cost and expense, to defend, hold harmless and indemnify (collectively, “Indemnify”) Sorrento and its Affiliates and their respective directors, officers and employees (the “Sorrento Indemnitees”) from and against any and all liabilities, damages, penalties, fines, costs and expenses (including, reasonable attorneys’ fees and other expenses of litigation) (collectively, “Liabilities”) resulting from suits, claims, actions and demands, in each case brought by a Third Party (each, a “Third-Party Claim”) against any Sorrento Indemnitee and arising from or occurring as a result of: (i) the development, manufacture or commercialization of the Licensed Materials, Licensed Product, Licensed Intellectual Property Rights or any other product or service by or on behalf of ACEA, its Affiliates or any of their respective other (sub)licensees; (ii) any material breach of any of ACEA’s obligations, representations, warranties or covenants under this Agreement; or (iii) the gross negligence or willful misconduct of a ACEA Indemnitee under this Agreement. ACEA’s obligation to Indemnify the Sorrento Indemnitees pursuant to this Section 8.1 shall not apply to the extent that any such Liabilities are the result of a material breach by Sorrento of its obligations, representations, warranties or covenants under this Agreement or Sorrento’s gross negligence or willful misconduct.

Section 8.2By Sorrento. Sorrento hereby agrees to Indemnify ACEA and its agents, directors, officers and employees (the “ACEA Indemnitees”) from and against any and all Liabilities resulting from Third-Party Claims against any ACEA Indemnitee arising from or occurring as a result of: (i) the development, manufacture or commercialization of the Licensed Products by or on behalf of Sorrento, its Affiliates or Sublicensees; (ii) any material breach of any of Sorrento’s obligations, representations, warranties or covenants under this Agreement; or (iii) the gross negligence or willful misconduct of a Sorrento Indemnitee under this Agreement. Sorrento’s obligation to Indemnify ACEA Indemnitees pursuant to this Section 8.2 shall not apply

to the extent that any such Liabilities are the result of a material breach by ACEA of its obligations, representations, warranties or covenants under this Agreement or ACEA’s gross negligence or willful misconduct.

Section 8.3Indemnity Procedure. To be eligible to be Indemnified hereunder, the indemnified Person shall provide the indemnifying Party with prompt written notice of the Third-Party Claim giving rise to the indemnification obligation pursuant to this Article 8 and the right to control the defense (with the reasonable cooperation of the indemnified Person) or settlement any such claim; provided, however, that the indemnifying Party shall not enter into any settlement that admits fault, wrongdoing or damages without the indemnified Person’s written consent, such consent not to be unreasonably withheld or delayed. The indemnified Person shall have the right to join, but not to control, at its own expense and with counsel of its choice, the defense of any claim or suit that has been assumed by the indemnifying Party.

Section 8.4Insurance. Each Party, at its own expense, shall maintain liability insurance (or self-insure) in an amount consistent with industry standards, with limits of liability not less than those specified below, during the term of this Agreement.

(a)Commercial general liability insurance against claims for bodily injury and property damage which shall include contractual coverage and product liability coverage, with limits of not less than one million dollars ($1,000,000) per occurrence and in the aggregate.

(b)Workers compensation and employers’ liability with limits to comply with the statutory requirements of the state(s) in which the Agreement is to be performed. The policy shall include employers’ liability for not less than one million dollars ($1,000,000) per accident.

Each Party shall provide a certificate of insurance (or evidence of self-insurance) evidencing such coverage to the other Party upon request.

Section 8.5LIMITATION OF LIABILITY. EXCEPT WITH RESPECT TO ANY BREACH OF SECTION 2.2, ARTICLE IX OR AS MAY BE PAYABLE PURSUANT TO THE APPLICABLE PARTY’S INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT, TO THE MAXIMUM EXTENT PERMITTED BY LAW AND EXCEPT FOR FRAUD OR WILLFUL MISCONDUCT, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, RELIANCE OR PUNITIVE DAMAGES, WHETHER LIABILITY IS ASSERTED IN CONTRACT, TORT (INCLUDING NEGLIGENCE AND STRICT PRODUCT LIABILITY), OR CONTRIBUTION, AND IRRESPECTIVE OF WHETHER THAT PARTY OR ANY REPRESENTATIVE OF THAT PARTY HAS BEEN ADVISED OF, OR OTHERWISE MIGHT HAVE ANTICIPATED THE POSSIBILITY OF, ANY SUCH LOSS OR DAMAGE. EXCEPT WITH RESPECT TO SORRENTO’S PAYMENT OBLIGATIONS HEREUNDER, EACH PARTY’S TOTAL CUMULATIVE LIABILITY IN CONNECTION WITH THIS AGREEMENT, THE LICENSED INTELLECTUAL PROPERTY RIGHTS, LICENSED MATERIALS AND LICENSED PRODUCTS, WHETHER IN CONTRACT OR TORT OR OTHERWISE, WILL NOT EXCEED FIVE MILLION DOLLARS ($5,000,000 USD).

ARTICLE IX

CONFIDENTIALITY

Section 9.1Confidentiality. During the term and for a period of five (5) years thereafter, each Party shall maintain all Confidential Information of the other Party in trust and confidence and shall not, without the written consent of the other Party, disclose any Confidential Information of the other Party to any Third Party or use any Confidential Information of the other Party for any purpose other than as necessary in performance of its obligations hereunder or in connection with the exercise by Sorrento, its Affiliates or their respective Sublicensees of any of the licenses or rights granted under this Agreement provided such Affiliates and Sublicensees are subject to confidentiality obligations no less restrictive than the confidentiality obligations provided hereof. The confidentiality obligations of this Section 9.1 shall not apply to Confidential Information to the extent that the receiving Party can establish by competent evidence that such Confidential Information: (a) is publicly known prior or subsequent to disclosure without breach of confidentiality obligations by such Party or its employees, consultants or agents; (b) was in such Party’s possession at the time of disclosure without any restrictions on further disclosure; (c) is received by such receiving Party, without any restrictions on further disclosure, from a Third Party who has the lawful right to disclose it and without restriction on disclosure; or (d) is independently developed by employees or agents of the receiving Party who had no access to the disclosing Party’s Confidential Information.

Section 9.2Authorized Disclosure. Nothing herein shall preclude a Party from disclosing the Confidential Information of the other Party to the extent:

(a)such disclosure is reasonably necessary (i) for the filing or prosecuting of the Licensed Patents as contemplated by this Agreement; (ii) to comply with the requirement of Regulatory Authorities with respect to obtaining and maintaining Regulatory Clearance and/or Approval (or any pricing and reimbursement approvals) of any Licensed Product; or (iii) for prosecuting or defending litigations as contemplated by this Agreement;

(b)such disclosure is reasonably necessary to its employees, agents, consultants or contractors on a need-to-know basis for the sole purpose of performing its obligations or exercising its rights under this Agreement; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement;

(c)such disclosure is reasonably necessary to any bona fide potential or actual investor, acquiror, merger partner, or other financial or commercial partner for the sole purpose of evaluating an actual or potential investment, acquisition or other business relationship; provided that in each case, the disclosees are bound by written obligations of confidentiality and non-use consistent with those contained in this Agreement;

(d)such disclosure is reasonably necessary to comply with applicable Laws, including regulations promulgated by applicable security exchanges, a valid order of a court of competent jurisdiction, administrative subpoena or order.

Notwithstanding the foregoing, in the event a Party is required to make a disclosure of the other Party’s Confidential Information pursuant to any of Sections 9.2(a) through 9.2(d), such Party shall promptly notify the other Party of such required disclosure and to the extent commercially reasonable, shall use reasonable efforts to obtain, or to assist the other Party in obtaining, a protective order preventing or limiting the required disclosure.

Section 9.3Return of Confidential Information. Promptly after the termination or expiration of this Agreement for any reason, each Party shall return to the other Party all tangible manifestations of such other Party’s Confidential Information at that time in the possession of the receiving Party; provided, the foregoing shall not be deemed to apply to, limit or restrict Sorrento, its Affiliates or their respective Sublicensees from retaining, using and disclosing any Confidential Information of ACEA in connection with exercising any of the licenses, rights or discharge of obligations under this Agreement that survive such termination or expiration of this Agreement .

Section 9.4Equitable Relief. Each Party acknowledges that its breach of Article IX of this Agreement may cause irreparable injury to the other Party for which monetary damages may not be an adequate remedy. Therefore, each Party shall be entitled to seek injunctive and other appropriate equitable relief from a court of competent jurisdiction to prevent or curtail any actual or threatened breach of the obligations relating to Confidential Information set forth in this Article IX by the other Party, without the necessity of posting a bond. The rights and remedies provided to each Party in this Article IX are cumulative and in addition to any other rights and remedies available to such Party at law or in equity.

ARTICLE X

MISCELLANEOUS

Section 10.1Bankruptcy. All rights granted under this Agreement (including the license rights under Section 2.1 will be considered for purposes of section 365(n) of 11 U.S.C. (the “Bankruptcy Code”) licenses of rights to “intellectual property” as defined under section 101(56) of the Bankruptcy Code. The Parties agree that each Party will retain and may fully exercise all of its rights and elections under the Bankruptcy Code. In the event that a Party seeks or is involuntarily placed under the protection of the Bankruptcy Code, and the trustee in bankruptcy rejects this Agreement, the other Party may elect, pursuant to section 365(n), to retain all rights granted to it with respect to the license rights granted hereunder to the extent permitted by law. Upon the written request of a Party to the other Party or the applicable bankruptcy trustee, the other Party or the applicable bankruptcy trustee will not interfere with the rights of the requesting Party as provided in this Agreement.

Section 10.2Consent to Amendments; Waiver. This Agreement may be amended or modified, in each case upon the approval, in writing, executed by ACEA and Sorrento. Each of ACEA and Sorrento, as applicable, may: (a) extend the time for the performance of any of the obligations or other acts of the other; (b) waive any inaccuracies in the representations and warranties of the other contained herein or in any document delivered by the other pursuant hereto or (c) waive compliance with any of the agreements of the other or conditions to such other’s obligations contained herein. Any such extension or waiver will be valid only if set forth in an instrument in writing signed by the Party to be bound thereby.

Section 10.3Entire Agreement. This Agreement, including the exhibits attached hereto, and the other agreements referred to herein constitute the entire agreement among the Parties with respect to the matters covered hereby and supersede all previous written, oral or implied understandings among them with respect to such matters.

Section 10.4Successors and Assigns. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by Sorrento without the prior written consent of ACEA, except that Sorrento shall have the right to assign any of the foregoing (including by operation of law) to the surviving party of any merger, acquisition, or reorganization to which it is a party, or to the purchaser of all or substantially all of Sorrento’s business or assets related to this Agreement. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by ACEA without the prior written consent of Sorrento, except that ACEA shall have the right to assign any of the foregoing (including by operation of law) to the surviving party of any merger, acquisition, or reorganization to which it is a party, or to the purchaser of all or substantially all of ACEA’s business or assets related to this Agreement. Except as otherwise expressly provided in this Agreement, all covenants and agreements set forth in this Agreement by or on behalf of the Parties shall bind and inure to the benefit of the respective successors and permitted assigns of the Parties, whether so expressed or not.

Section 10.5Governing Law; Consent to Jurisdiction; Venue; Waiver of Jury Trial. This agreement will be governed by and construed in accordance with the domestic laws of the State of California for contracts entered into and to be performed in such state without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California. Each Party hereto hereby submits to the exclusive jurisdiction of the United States District Court for the Southern District of State of California and of any State of California State court sitting in California for purposes of all legal proceedings arising out of or relating to the contemplated transactions and agrees that process shall be served upon such Party in the manner set forth in Section 10.6, and that service in such manner shall constitute valid and sufficient service of process. Each Party hereto irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Each Party hereto hereby irrevocably waives any and all right to trial by jury in any legal proceeding arising out of or relating to the contemplated transactions.

Section 10.6Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made (a) as of the date delivered, if delivered personally, (b) on the date the delivering Party receives confirmation, if delivered by facsimile or electronic transmission, (c) three (3) business days after being mailed by registered or certified mail (postage prepaid, return receipt requested) or (d) one (1) Business Day after being sent by overnight courier (providing proof of delivery), to the Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.6):


	If to Sorrento, to:

		Sorrento Therapeutics, Inc.
		4955 Directors Place
		San Diego, CA 92121
		Facsimile: [...***...]
		Attention: Henry Ji, Ph.D., President & Chief Executive Officer

	with copies, which shall not constitute notice to Sorrento, to:

		Sorrento Therapeutics, Inc.
		4955 Directors Place
		Facsimile: [...***...]
		Attention: Legal Department

		and

		Paul Hastings LLP
		1117 S. California Avenue
		Palo Alto, CA 94304
		Facsimile: (650) 320-1904
		Attention: Jeffrey Hartlin, Esq.

	If to ACEA, to:

		ACEA Therapeutics, Inc.
		Xiao Xu
		President & CEO
		9924 Mesa RIM Rd
		San Diego, CA 92121
		Telephone No.: [...***...]
		Email Address: [...***...]

	with copies, which shall not constitute notice to ACEA, to:

		ACEA Therapeutics, Inc.
		Lei Lu


		Senior Vice President, Finance
		9924 Mesa RIM Rd
		San Diego, CA 92121
		Telephone No.: [...***...]
		Email Address: [...***...]

		and

		Morrison & Foerster
		12531 High Bluff Dr # 100
		San Diego, CA 92130
		Tel.: (858) 720-5198
		Attention: Steve Rowles
		Email: [...***...]

Section 10.7 Force Majeure. Both Parties shall be excused from the performance of their obligations under this Agreement to the extent that such performance is prevented by force majeure and the nonperforming Party promptly provides notice of the prevention to the other Party. Such excuse shall be continued so long as the condition constituting force majeure continues and the nonperforming Party takes reasonable efforts to remove the condition. For purposes of this Agreement, force majeure shall mean conditions beyond the reasonable control of the Parties, including an act of God, war, civil commotion, terrorist act, labor strike or lock-out, epidemic, pandemic, global outbreak of an infectious disease, failure or default of public utilities or common carriers, destruction of production facilities or materials by fire, earthquake, storm or like catastrophe, and failure of plant or machinery (provided that such failure could not have been prevented by the exercise of skill, diligence, and prudence that would be reasonably and ordinarily expected from a skilled and experienced person engaged in the same type of undertaking under the same or similar circumstances). If a force majeure persists for more than ninety (90) days, then the Parties shall discuss in good faith the modification of the Parties’ obligations under this Agreement in order to mitigate the delays caused by such force majeure.

Section 10.8Exhibits. The exhibits to this Agreement constitute a part of this Agreement and are incorporated into this Agreement for all purposes as if fully set forth herein. The disclosure of any item or matter in any exhibit hereto shall not be taken as an indication of the materiality thereof or the level of materiality that is applicable to any representation or warranty set forth herein.

Section 10.9Counterparts. This Agreement may be executed in counterparts, all of which taken together shall constitute one agreement. For purposes of this Agreement, signatures delivered by facsimile or by email in the portable document format (PDF) or any other electronic format shall be accepted and binding as original signatures.

Section 10.10Severability. Should any provision of this Agreement or the application thereof to any Person or circumstance be held invalid or unenforceable to any extent: (a) such provision shall be ineffective to the extent, and only to the extent, of such unenforceability or prohibition and shall be enforced to the greatest extent permitted by law, (b) such unenforceability or prohibition in any jurisdiction shall not invalidate or render unenforceable such provision as applied (i) to other Persons or circumstances or (ii) in any other jurisdiction, and (c) such unenforceability or prohibition shall not affect or invalidate any other provision of this Agreement.

Section 10.11No Third-Party Beneficiaries. Except as otherwise expressly provided in this Agreement, no Person which is not a Party shall have any right or obligation pursuant to this Agreement.

Section 10.12No Strict Construction. Each of the Parties acknowledges that this Agreement has been prepared jointly by the Parties, and shall not be strictly construed against any Party.

[Signature Page Follows]

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

	SORRENTO THERAPEUTICS, INC.

	By:	/s/ Henry Ji, Ph.D.
		Name: Henry Ji, Ph.D.
		Title: President & Chief Executive Officer

	ACEA Therapeutics, Inc.

	By:	/s/ Xiao Xu
		Name: Xiao Xu
		Title: Chief Executive Officer

Exhibit A

Licensed Materials

Abivertinib (AC0010): A selective, orally available irreversible small molecule TKI to BTK and mutant EGFR, including any improvements thereto.

Exhibit 10.2

EXCLUSIVE LICENSE AGREEMENT

This Agreement is dated July 23, 2020 (the “Effective Date”), and is between THE TRUSTEES OF COLUMBIA UNIVERSITY IN THE CITY OF NEW YORK, a New York corporation (“Columbia”), and Sorrento Therapeutics, Inc., a Delaware corporation (the “Company”). Columbia and the Company agree as follows:

Definitions. In this Agreement, the following definitions apply:

a.“Affiliate” means any corporation or other entity that directly or indirectly controls, is controlled by, or is under common control with, another corporation or entity. Control means (a) direct or indirect ownership of, or other beneficial interest in, fifty percent (50%) (or, outside a party’s home territory, such lesser percentage as is the maximum, permitted level of foreign investment) or more of the voting stock, other voting interest, or income of a corporation or other entity; or (b) the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a corporation or other entity, whether through the ownership of voting securities, by contract or otherwise.

b.“Cover” or “Covered By” means (i) infringes, in the case of a claim in an issued and unexpired patent, or (ii) would infringe the claim if it existed in an issued patent, in the case of a claim in a pending application.

c.“Designee” means a corporation or other entity that is employed by, under contract to, or in partnership with (i) the Company, (ii) a Sublicensee, (iii) an Affiliate of the Company or (iv) an Affiliate of a Sublicensee, where the corporation or other entity is granted the right to make, use, sell, promote, distribute, market, import, or export Products.

d.“Field” means all diagnostic applications of High-Performance LAMP (HP-LAMP) for coronaviruses and influenza viruses.

e.“License Year” means the one-year from the Effective Date of this Agreement or an anniversary of the Effective Date to the next anniversary of the Effective Date.

f.“Materials” means the tangible physical material, if any, set forth in Exhibit B and delivered to the Company under this Agreement, and any progeny or derivatives thereof developed by Columbia and the Company, its Affiliates or Sublicensees. The parties shall make good faith efforts to amend Exhibit B from time to time as needed to list the Materials.

g.“Net Sales” means the gross amounts actually received by Company, Designees, Sublicensees, and Affiliates of any of the foregoing (each, an “Entity”) for arms-length sales of the Product in the Field to a Third Party or to an Entity that is an end-user of the Product calculated in accordance with GAAP, consistently applied, less the following deductions to the extent included in such gross amounts or otherwise incurred by the Entity and not otherwise recovered by or reimbursed to such Entity with respect to the sale of such Product: (i) normal

and customary rebates, quantity, trade and cash discounts, and other usual and customary discounts; (ii) charge-backs and rebates actually granted to customers, including managed health care organizations or to national, state or local governments, their respective agencies, purchasers or reimbursers, adjustments arising from consumer discount programs, co-pay assistance programs or other similar programs; (iii) retroactive price reductions, credits or allowances actually granted or made for rejection of or return of previously sold Product, including for recalls or damaged goods; (iv) customary fees paid to distributors, including group purchasing organizations (excluding sales representatives of Company); (v) sales credits accrued in accordance with GAAP, including price protection, shelf stock adjustments, adjustments for uncollectible accounts and other similar and customary deductions which are in accordance with GAAP; (vi) returns of a Product for any reason other than returns covered under (iii) above; (vii) freight, postage, shipping and insurance charges with respect to such Product; and (viii) customary sales taxes, excise taxes, use taxes, import/export duties or other governmental charges actually levied on or measured by the billing amount for such Product, including value-added taxes, in each case to the extent not reimbursed. Each of the foregoing deductions shall be determined as occurred in the ordinary course of business in accordance with GAAP. In no event shall any particular amount identified above be deducted more than once in calculating Net Sales (i.e., no “double counting” of deductions). In no event shall a particular amount identified above to be deducted exceed the gross amount invoiced resulting in a negative royalty.

Notwithstanding anything to the contrary in the definition of Net Sales, the supply or other disposition of Products (i) as samples or (ii) for use in any tests or studies reasonably necessary to comply with any applicable law, regulation or request by a regulatory or governmental authority, in each case, shall not be included in the computation of Net Sales.

h.“Enabled Product” means any product or service (or component thereof) the discovery, development, manufacture, use, sale, offering for sale, importation, exportation, distribution, rental or lease of which involves the use of or incorporation, in whole or in part, of Materials or Technical Information.

i.“Patent” or “Patents” means the following:

(i)the patents and patent applications listed in Exhibit A to this Agreement;

(ii)any non-provisional patent applications that claim priority to any provisional patent applications listed in Exhibit A to this Agreement;

(iii)any claims of continuation-in-part applications that claim priority to the United States patent applications listed in Exhibit A, but only where those claims are directed to inventions disclosed in the manner provided in the first paragraph of 35 U.S.C. Section 112 in the United States patent applications listed in Exhibit A, and those same claims in any patents issuing from those continuation-in-part applications;

(iv)any rights corresponding to the preceding in foreign patent applications, foreign patents or related foreign patent documents that claim priority to one or more of the patents and patent applications listed in Exhibit A;

(v)any divisionals, continuations, reissues, re-examinations, renewals, substitutions, and extensions of the preceding; and

(vi)any rights corresponding to the preceding and issuing as patents from the preceding.

Patents will not include any patents or patent applications based on research conducted after the Effective Date, except as otherwise agreed to in a separate writing.

j.“Patent Product” means any product or service (or component thereof) the discovery, development, manufacture, use, sale, offering for sale, importation, exportation, distribution, rental, or lease of which is Covered By a claim of a Patent.

k.“Product” or “Products” means a Patent Product or an Enabled Product or both.

l.“Sublicensee” means any third party to whom the Company has granted a sublicense under this Agreement. However, an Affiliate of the Company exercising rights under this Agreement will not be considered a Sublicensee.

m.“Technical Information” means Columbia’s property interest in any know-how, technical information, and data which was each of the following:

i)developed by Columbia by or under the direction of Dr. Zev Williams,

ii)developed before the Effective Date,

iii)provided to or received by the Company from Columbia, and

iv)necessary or useful for the discovery, development, manufacture, use, sale, offering for sale, importation, exportation, distribution, rental or lease of a Product.

Technical Information includes, but is not limited to, the following:

i)any know-how, technical information, and data disclosed in any Patent;

ii)any reports or disclosures concerning research or inventions provided or disclosed to, or otherwise provided by Columbia and received by, the Company; and

iii)any information described in Exhibit C to this Agreement.

n.“Territory” means worldwide.

o.“Third Party” means any entity or person other than the Company, the Sublicensees, the Designees, or their Affiliates.

License Grant.

a.Grant. Subject to the terms of this Agreement, Columbia hereby grants the Company and any Affiliate of the Company the following:

(i)an exclusive license under the Patents to discover, develop, manufacture, make, have made, use, sell, offer to sell, have sold, import, export, distribute, rent, lease or otherwise commercialize or exploit Products solely in the Field and throughout the Territory;

(ii)an exclusive license to use Technical Information to discover, develop, manufacture, make, have made, use, sell, offer to sell, have sold, import, export, distribute, rent, lease or otherwise commercialize or exploit Products solely in the Field and throughout the Territory, until such time as Technical Information is published or otherwise publicly distributed and thereafter, the license granted hereunder for such Technical Information which is published or otherwise publicly distributed and thereafter shall automatically convert to a non-exclusive license, provided however, that Columbia and its faculty and employees shall have the right to publish, disseminate or otherwise disclose the Technical Information; and

(iii)an exclusive license to use Materials to discover, develop, manufacture, make, have made, use, sell, offer to sell, have sold, import, export, distribute, rent, lease or otherwise commercialize or exploit the Products solely in the Field and throughout the Territory.

b.Option Grant. Columbia hereby grants to Company an exclusive option for the Option Term (defined below) to acquire an exclusive license to the Patents, Materials and Technical Information (with respect to Technical Information, such license subject to the conditions further set forth in Section 2(a)(ii)) to discover, develop, manufacture, make, have made, use, sell, offer to sell, have sold, import, export, distribute, rent, lease or otherwise commercialize or exploit Products in the Option Field (as defined hereafter) and throughout the Territory (the “Option”). The “Option Field” means all diagnostic applications of High-Performance LAMP (HP-LAMP) other than for coronavirus and influenza viruses. The intent of the parties is that the Option Field expands the licensed field to all diagnostic applications of High-Performance LAMP (HP-LAMP). The “Option Term” is twelve (12) months from the Effective Date.

(i)Conditions Precedent for Exercise of Option. The Company may exercise the Option provided that it is in good standing under this Agreement at the time of exercise and only if the following conditions precedent (the “Conditions Precedent”) have been satisfied before the expiration of the Option Period:

(A)Columbia has received satisfactory responses to its reasonable requests for information from Company, and Columbia has completed its due diligence review to its reasonable satisfaction;

(B)Company has submitted to Columbia a development plan for the additional diagnostic application(s) included within the Option Field and such plan is reasonably acceptable to Columbia; and

(C)Each party has received all necessary internal approvals for the transactions contemplated by this Agreement.

(ii)Upon Company’s written notice to Columbia exercising the Option, the parties will negotiate in good faith and complete an amendment to this Agreement to: (i) expand the Field definition of Section 1(d) to include the additional diagnostic application(s) within the Option Field, and (ii) add additional diligence and development milestones to Section 6(a)(i), as mutually agreeable to the parties, covering the additional diagnostic application(s) within the Option Field. Such amendment will be negotiated and completed within sixty (60) days of Company’s notice of option exercise to Columbia. For clarity, Company may exercise the Option more than once during the Option Term, subject to the above conditions precedent being satisfied.

c.Sublicense. Columbia hereby grants the Company the right to grant sublicenses on the following conditions:

(i)the Sublicensee agrees to abide by and be subject to all the terms of this Agreement that apply to the Company;

(ii)the Sublicensee shall not grant further sublicenses under this Agreement without Columbia’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed;

(iii)the Company shall provide for the Company’s right to terminate the sublicense in the sublicense agreement if any Sublicensee (or any entity or person acting on its behalf) initiates any proceeding or otherwise asserts any claim challenging the validity or enforceability of any Patent in any court, administrative agency or any other forum, and if such event occurs, the Company shall, upon written request by Columbia, immediately terminate the sublicense agreement with the Sublicensee;

(iv)the sublicense agreement provides that, in the event of any inconsistency between the sublicense agreement and this Agreement, this Agreement controls;

(v)the Sublicensee submits reports to the Company consistent with the reporting provision of Section 5a of this Agreement;

(vi)the Company remains liable for the performance of its and its Sublicensee’s obligations under this Agreement;

(vii)the Company notifies Columbia of any proposed grant of a sublicense and provides Columbia, upon request, an unredacted copy of any proposed sublicense agreement seven (7) business days before the execution of the sublicense;

(viii)no sublicense or attempt to obtain a sublicensee relieves the Company of its obligations under Section 6 to exercise its own commercially reasonable efforts, directly or through a sublicense, to discover, develop and market Products, nor relieves the Company of its obligations to pay Columbia the license fees, royalties and other payments due under this Agreement, including but not limited to such obligations under Sections 4, 5 and 11 of this Agreement;

(ix)Columbia is a third-party beneficiary of each sublicense, entitled to enforce it under its terms; and

(x)Columbia has no liability to any sublicensee.

d.Government Rights. This Agreement is subject to (i) any limitations imposed by the terms of any government grant, government contract, or government cooperative agreement that apply to the technology that is the subject of this Agreement and (ii) applicable requirements of 35 U.S.C. Sections 200 et seq., as amended, and implementing regulations and policies. To the extent required under 35 U.S.C. Section 204, the Company and/or its Sublicensees, Designees, and their Affiliates shall substantially manufacture Product in the United States. To the extent required under 35 U.S.C. Section 202(c)(4), Columbia has granted or may grant the United States government a non-exclusive, non-transferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States any Patent throughout the world.

e.Reservation. Columbia has reserved to itself all rights not granted in this Agreement. Except as expressly provided under this Section 2, Columbia grants no right or license (expressly or by implication or estoppel) to the Company or its Affiliates or Sublicensees under any tangible or intellectual property, materials, patent, patent application, trademark, copyright, trade secret, know-how, technical information, data or other proprietary rights.

f.Global Social Responsibility. During the term of this Agreement, Columbia and the Company shall take into consideration the principle of Global Social Responsibility in performing the various activities contemplated under this Agreement. “Global Social Responsibility” means facilitating the availability of (Licensed) Products in Developing Countries at locally affordable prices, under reasonable circumstances and terms to improve access to the Products in those countries. “Developing Countries” means those countries listed by the World Bank as “Low-Income Economies,” as that list may change from time to time. Solely by way of example, the parties may mutually agree to revise royalty rates, adjust the fair market value, consider non-monetary consideration, or develop patent strategies in support of each party’s dedication to Global Social Responsibility or a combination of the preceding.

Reservation of Rights for Research Purposes; Freedom of Publication.

a.Research Purposes Reservation. To the extent Patents and Materials are exclusively licensed under this Agreement, Columbia reserves the royalty-free, non-exclusive right to practice the Patents and to use Materials solely for academic research and educational purposes in the Field. Columbia may allow other entities or individuals to practice and use the Patents and Materials solely for academic research and educational purposes in the Field. Columbia shall obtain from all such entities or individuals an agreement in writing to limit such practice and use solely to academic research and educational purposes in the form of a material transfer agreement, attached hereto as Exhibit F as reference. Outside the Field, Columbia and its faculty or employees may practice and use the Patents and Materials for any purpose and may license or permit third parties to practice and use the Patents and Materials. For the avoidance of doubt, nothing in this Agreement shall limit or diminish Columbia and its faculty and employees right to use, publish, share, disseminate or otherwise disclose the Technical Information for academic research and educational purposes.

b.Publication. The Company acknowledges that Columbia is dedicated to the free scholarly exchange and the public dissemination of the results of its scholarly activities. Columbia and its faculty and employees may publish, disseminate or otherwise disclose any information relating to its research activities, including Technical Information.

Fees, Royalties, and Payment.

a.Importance of Technical Information and Materials. The Company has requested and Columbia has agreed to grant rights to Technical Information and Materials. The Company requires these rights to develop and commercialize the technology licensed under this Agreement. Because of the importance of Technical Information and Materials, the Company has agreed to pay Columbia royalties on Enabled Products, as specified below, even if it is not Covered By a Patent, to obtain rights to Technical Information and Materials. The Company has agreed to these payments because of the commercial value of Technical Information and Materials that is separate and distinct from the commercial value of the Patents. The Company acknowledges that it would not have entered into this Agreement without receiving the rights to the Technical Information and Materials specified in Section 2. The Company further acknowledges that licenses to Technical Information, Materials, and each patent and application within the definition of Patents were separately available from a license to the Patents and that, for convenience and because of the preference of the Company, the parties executed a combined license to the Patents, Technical Information, and Materials. For the convenience of the parties, Company has requested and Columbia has agreed to, the payment of a single royalty rate on Net Sales of Products in the Territory in place of a higher royalty rate on Net Sales of Patent Products and a lower royalty rate on Net Sales of Enabled Products. The parties acknowledge that the single royalty rate on Net Sales of Products in the Territory was specifically negotiated for in good faith and agreed to voluntarily by the Company without coercion by Columbia.

b.Consideration. The Company shall pay Columbia as follows:

(i)Upfront License Fee: A one-time, non-refundable, non-recoverable and non-creditable license fee in the sum of $5,000,000 USD, payable within ten (10) business days of execution of this Agreement;

(ii)Annual Fee: waived; and

(iii)Royalties:

(A)Subject to the terms and conditions of this Agreement, during the applicable royalty term, the Company shall pay to Columbia an earned royalty of [...***...]% on Net Sales of Products by Company, its Affiliates or Designees in the Field throughout the Territory. For clarity, royalties shall be payable only once on any Net Sales of Products in the Field throughout the Territory, including with respect to royalties for sales of Products by Sublicensees, their Designees or their Affiliates under Section 4c(i).

(B)No later than ten (10) days following the first bona fide commercial sale of a Product by the Company, a Sublicensee, a Designee, or any of their Affiliates, to a Third-Party customer, and the first business day of each January after that commencing with January 2022, the Company shall pay Columbia a non-refundable and non-recoverable minimum

royalty payment in the amount of $1,000,000 USD. The Company may credit each minimum royalty payment against earned royalties accrued during the same calendar year in which the minimum royalty payment is due and payable. To the extent minimum royalty payments exceed the earned royalties accrued during the same calendar year, the Company may not carry over this excess amount to any other year, either to decrease the earned royalties due in that year or to decrease the minimum royalty payments due in that year.

c.Sublicense Consideration. The Company shall pay Columbia the following non-refundable, non-recoverable and non-creditable amounts:

(i)Royalties: Concerning sales of Products by Sublicensees, their Designees, or their Affiliates, in the Territory, a non-refundable and non-recoverable royalty of [...***...]% of Net Sales of Products;

(ii)Other Payments: [...***...]% of any other gross revenues received by the Company from the Sublicensees, their Designees or their Affiliates as full or partial consideration for the grant of any sublicense (or any option or any right to negotiate for a sublicense) under Section 2c of this Agreement as follows:

(A)fees, payments and consideration (other than royalties based on Net Sales, and including any debt and equity securities or instruments, or the market value of an arm’s-length transaction of any cross-licensing rights granted by Sublicensee to the Company, any upfront, milestone or lump sum payments for the achievement of patent, pre-clinical, clinical, regulatory, sales or any other milestone) (the “Non-Royalty Sublicense Income” or “NRSI.”) For clarity, [...***...]% of NRSI shall be payable to Columbia regardless of whether the agreement granting the sublicense under Section 2(c) includes a license or sublicense to non-Columbia IP.

(B)The Company may credit any milestone payments made to Columbia under Section 4d against any amounts the Company is otherwise required to pay Columbia under Section 4c(ii) for the achievement of the same development milestone for the same Product.

d.Development Milestone Payments. If the Company, Sublicensees, or their Affiliates (collectively “Developer”) develops a Product for potential commercial sale in the Territory, the Company shall pay Columbia the following one-time, non-refundable, non-recoverable and non-creditable milestone payments for the first Product in a diagnostic application as follows:

(i)For coronaviruses: $[...***...] USD upon the earlier of (i) [...***...], payable only once upon the first [...***...] for such Product; or (ii) first [...***...] such Product.

(ii)For influenza viruses: $[...***...] USD upon the earlier of (i) [...***...], payable only once upon the first [...***...] such Product; or (ii) first [...***...] such Product.

(iii)For each additional diagnostic application in the Option Field, as applicable: $[...***...] USD upon the earlier of (i) [...***...], payable only once upon the first [...***...] such Product; or (ii) first [...***...] such Product.

e.Liquidated Damages on Challenge. If the Company (or any entity or person acting on its behalf) initiates any proceeding or otherwise asserts any claim challenging the validity or enforceability of any Patent in any court, administrative agency or any other forum (“Challenge”), the Company shall pay the following:

(i)all royalties accruing or due during the Challenge, in the manner and at times provided for in this Agreement;

(ii)[...***...] the amount of all costs and expenses incurred by Columbia in connection with defending the Challenge, including actual legal fees and disbursements (“Liquidated Damages”) during the course of the Challenge in recognition of damages to Columbia caused by the Challenge, including but not limited to lost commercial opportunity and goodwill, for which a sum certain will be difficult to determine; Columbia may bill the Company quarterly concerning those costs and expenses, and the Company shall make payment no later than thirty (30) days after receiving an invoice from Columbia; and

(iii)Liquidated Damages increase to [...***...] the amount of all costs and expense incurred by Columbia (including actual legal fees and disbursements) in connection with defending the Challenge if at least one claim of the Patent that is subject to the Challenge survives by not being found invalid or unenforceable, regardless of whether the claim is amended as part of the Challenge. Columbia may bill the Company for the increased Liquidated Damages (to the extent not already paid in 4e(ii)) upon the court, agency, or other forum issuing a judgment, order, or other document concluding the Challenge. The Company shall make payment no later than thirty (30) days after receiving an invoice from Columbia, regardless of whether the Company files an appeal from the Challenge.

The Company acknowledges that this Section 4e reasonably reflect the value derived from the Agreement by the Company in the event of a Challenge. The Company acknowledges that any payments made under this Section 4e are non-refundable and non-recoverable for any reason whatsoever. Notwithstanding any of the preceding, under no circumstances will the Company be subject to this Section 4e in the event that the Company (or any entity or person acting on its behalf) Challenges any Patent as a result of an action brought by Columbia against the Company.

f.No Non-Monetary Consideration. Without Columbia’s prior written consent, the Company, the Sublicensees, the Designees, and Affiliates of the preceding shall not solicit or accept any consideration for the sale of any Product other than as will be accurately reflected in Net Sales. If non-monetary consideration is received for any Product, Net Sales will be calculated based on the average price charged for such Product during the preceding calendar quarter in the relevant country, or in the absence of such sales, the fair market value of the Product, as determined by the parties in good faith. Furthermore, the Company shall not enter into any transaction with any Sublicensee, Designee, or Affiliate that would circumvent the Company’s monetary or other obligations under this Agreement.

g.Sale Below Fair Market Value. If Company, Sublicensees, Designees or their Affiliates sell Product to a Third Party to whom it also sells other products, the price per Product shall not be established more than [...***...] percent ([...***...]%) below the price of

Product when sold to a Third Party to whom it does not also sell other products, with the intent of increasing market share for other products sold by Company, Sublicensees, Designees or their Affiliates to such Third Party or for the purpose of reducing the amount of royalties payable on the Net Sales of Product. If the sale of any Product under such circumstances results in Net Sales below the fair market value of such Product, then the Net Sales of such Product in such transaction shall be deemed to be the fair market value for purposes of calculating payments owed to Columbia under this Agreement. Discounts for volume purchase of Product shall not be affected by this Section 4g.

Reports and Payments.

a.Reports. No later than thirty (30) days after the first business day of each calendar quarter of each applicable License Year of this Agreement, the Company shall submit to Columbia a written report concerning the preceding calendar quarter (the “Payment Report”), that includes the following:

(i)Gross and Net Sales of Products by the Company, Sublicensees, Designees, and their Affiliates during that quarter and detailed information sufficient to permit Columbia to verify the accuracy of reported Net Sales, including Product names, country where manufactured, country where sold, actual selling price, units sold;

(ii)Amounts accruing to, and amounts received by, the Company from its Sublicensees during that quarter and copies of the respective Payment Reports received by the Company from any Sublicensees;

(iii)A calculation under Section 4 of the amounts due to Columbia, referring to the applicable subsection of Section 4;

(iv)The exact date of the first commercial sale of a Product in the first Payment Report for the Product; and

(v)An unredacted copy of each report any Sublicensee has sent to the Company that is pertinent to any royalties or other sums owing to the Company for the preceding quarter.

b.Payments. Simultaneously with the submission of each Payment Report, the Company shall make payments to Columbia of the amounts due for the calendar quarter covered by the Payment Report. The Company shall pay by check payable to The Trustees of Columbia University in the City of New York and sent to the following address:

The Trustees of Columbia University in the City of New York

Columbia Technology Ventures

P.O. Box 1394

New York, NY 10008-1394

or to another address as Columbia may specify by notice under this Agreement, or if requested by Columbia, by wire transfer of immediately available funds by the Company to the following:

Wells Fargo

150 East 42^nd Street

New York, NY 10017

(This is the bank’s address, not Columbia University’s.

Do not use this address for correspondence to Columbia University.)

Routing #: [...***...]

Swift #: [...***...]

Columbia Account #: [...***...]

Beneficiary: Columbia University FBO Tech Ventures, Finance

Other identifying info: include invoice #, contract #

or to another bank and account identified by notice to the Company by Columbia. The Company shall pay for all bank charges for the wire transfer of funds for payments to Columbia and shall not deduct bank charges from the total amount due to Columbia. The Company shall send the quarterly royalty statement whether or not royalty payments are due.

c.Final Payment. No later than thirty (30) days after the date of termination or expiration of this Agreement, the Company shall pay Columbia the amounts that are due under this Agreement as of the date of the termination or expiration. The Payment Report for that payment will cover the period from the end of the last calendar quarter before termination or expiration to the date of termination or expiration. Nothing in the preceding is deemed to satisfy any of the Company’s other obligations under this Agreement upon termination or expiration.

d.Minimum. Minimum royalty payments are payable under Section 4b(iii)(B).

e.Foreign Revenue. Concerning revenues obtained by the Company in foreign countries, the Company shall pay Columbia the royalties in the United States in United States dollars. For royalty payments for transactions outside the United States, the Company shall first determine the royalty in the currency of the country in which it is earned. Second, the Company shall convert that currency to United States dollars using the buying rates of exchange quoted by The Wall Street Journal (or its successor) in New York, New York, for the last business day of the calendar quarter in which the royalties were earned. The Company shall pay any loss of exchange value, taxes, or other expenses incurred in the transfer or conversion of foreign currency into U.S. dollars, and any income, remittance, or other taxes on the royalties required to be withheld at the source, and shall not decrease the amount of royalties due Columbia. In the royalty statements, the Company shall show sales both in the local currency and US dollars, with the exchange rate used clearly stated.

f.Records. The Company shall maintain at its principal office the usual records showing its actions under this Agreement, and sufficient to determine the Company’s compliance with its obligations under this Agreement. Upon reasonable notice but not more than once per calendar year, Columbia may have a certified public accountant or auditor (each

as to whom the Company has no reasonable objection and who agrees to be bound by a reasonable confidential agreement) inspect and copy the records for the sole purpose of verifying the accuracy of the amounts paid under this Agreement. The review may cover not more than three (3) years before the first day of the calendar quarter in which Columbia requests the review. Once examined, such books and records will no longer be subject to further examination by Columbia under this Section 5f. Any amounts shown to have been underpaid shall be paid by the Company to Columbia and any amounts shown to have been overpaid shall be refunded by Columbia to the Company, in each case, within forty-five (45) calendar days from the date of the audit report. If the review shows the Company has underpaid by [...***...] percent ([...***...]%) or more concerning any calendar quarter then the Company shall pay, no later than ten (10) days after a demand by Columbia, the costs and expenses of the review (including the fees charged by Columbia’s accountant and attorney involved in the review). The Company agrees to cooperate fully with Columbia’s accountant or auditor and attorney in connection with any such review. During the review, the Company shall provide Columbia’s accountant or auditor with all information reasonably requested to allow the accountant or auditor to audit and test for completeness. That information may include but is not limited to information relating to sales, inventory, manufacturing, purchasing, transfer records, customer lists, invoices, purchase orders, sales orders, shipping documentation, third-party royalty reports, cost information, pricing policies, and agreements with third parties (including the Sublicensees, the Designees, the Affiliates of the Company, the Sublicensees, and the Designees, and the customers).

g.Late Payment. Notwithstanding anything to the contrary in this Agreement (including Section 15b), and without limiting any of Columbia’s rights and remedies under this Agreement, if any payment required under this Agreement is made late (including unpaid portions of amounts due), then the Company shall pay interest, compounded monthly, either at the rate of [...***...]% per year or in Columbia’s sole discretion, at the U.S. prime rate plus [...***...]% as published by the Wall Street Journal on the last day of the applicable billing period. If any interest is charged or paid in excess of the maximum rate permitted by New York State Law, the excess is hereby deemed the result of a mistake and Columbia shall credit or refund (at the Company’s option) to the Company the interest paid in excess of the maximum rate.

h.Collection Costs. The Company shall reimburse Columbia for any costs and expenses incurred in connection with collecting on any arrears of the Company concerning its payment and reimbursement obligations under this Agreement (including Section 11b of this Agreement), including the costs of engaging any collection agency for those purposes.

Diligence.

a.Diligence Milestones. The Company shall use its commercially reasonable efforts to research, discover, develop and market Products for commercial sale and distribution in the Territory. The Company shall achieve the following due diligence milestones (“Milestones”) by the dates (Achievement Dates”) as set forth below:

(i)

Due Diligence Milestones.


Milestone	Achievement Date
1. Adhering to its development plan, a current version of which is attached as Exhibit D	Ongoing
2. First commercial sale of a Product in the US	Within [...*...] of the date of EUA approval; and in no event later than [...*...]

Notwithstanding the foregoing, if Company believes that it will be unable to achieve Milestone 2, and provided Company is in compliance with all other material terms and obligations of this Agreement, Company may notify Columbia in writing in advance of the relevant deadline. Company shall include with such notice (a) a reasonable explanation of the reasons for such failure (and lack of finances will not constitute reasonable basis for such failure) (“Explanation”) and (b) a reasonable, detailed, written plan for promptly achieving Milestone 2 by an extended deadline (“Plan”). If Company so notifies Columbia and provides Columbia with an Explanation and Plan, both of which are reasonably acceptable to Columbia, then the Achievement Date for Milestone 2 will be amended to the extended deadline set forth in the Plan; provided in no event shall the extended deadline be later than [...***...]. If Company so notifies Columbia and provides Columbia with an Explanation and Plan, but the Explanation or Plan is not reasonably acceptable to Columbia, then Company will have the option to extend the Achievement Date for Milestone 2 by up to [...***...] periods by paying to Columbia an extension fee of $[...***...] for each [...***...] period. Upon such extension of a milestone that delays entry of any Product into the market, the term of this agreement and the period for payment of royalties on Products is extended for an equal period of time.

b.Termination or Conversion. Notwithstanding any other provisions of this Agreement, if the Company does not achieve any of the diligence milestones set forth in numbers above by the achievement dates specified, taking into consideration any extensions for which Company has paid the extension fee, then Columbia may take one of the following actions:

i)terminate all of the licenses granted under Section 2 in accordance with Section 16 of this Agreement, or

ii)Columbia may convert any or all of the exclusive licenses to non-exclusive licenses with no right to sublicense and no right to initiate legal proceedings under Section 11.

c.Reports. No less often than every twelve (12) months after the Effective Date of this Agreement, the Company shall report in writing to Columbia on progress made toward the diligence objectives set forth above, using Exhibit E to this Agreement or an equivalent to Exhibit E to make the report.

Confidentiality.

a.Confidential Information. Except to the extent required to exercise its rights or perform its obligations under this Agreement, the Company shall treat as confidential the Patents, Materials, and Technical Information disclosed under this Agreement, and shall not disclose or distribute them to any Third Party without Columbia’s written permission.

b.Authorized Disclosures. Notwithstanding the above, the Company shall be permitted to disclose or distribute confidential information under this Agreement to a Third Party under the following exceptions:

i)The Company may disclose confidential information to its or its Affiliates’ employees, agents, consultants, contractors, licensees, sublicensees or others on a need-to-know basis, provided that in each case the recipient of such confidential information are bound by written obligations of confidentiality and non-use at least as equivalent in scope as those set forth in this Section 7 prior to any such disclosure;

ii)The Company may disclose confidential information as reasonably necessary (i) for the filing or prosecuting of Patents as contemplated by this Agreement; (ii) to comply with the requirement of regulatory authorities with respect to obtaining and maintaining regulatory clearance and/or approval (or any pricing and reimbursement approvals) of any Product; or (iii) for prosecuting or defending litigations as contemplated by this Agreement;

iii)The Company may disclose confidential information that is reasonably necessary to comply with applicable Laws, including regulations promulgated by applicable security exchanges, a valid order of a court of competent jurisdiction, administrative subpoena or order.

iv)The Company may disclose confidential information to existing and potential investors, consultants, advisors (including financial advisors, lawyers and accountants) and others on a need to know basis in order to further the purposes of this Agreement; provided that in connection with such disclosure, disclosees shall be subject to obligations of confidentiality and non-use with respect to such confidential information substantially similar to the obligations of confidentiality and non-use pursuant to this Section 7.

c.Permitted Disclosures. The parties shall keep confidential the business terms of this Agreement and any financial information disclosed by one party to the other under this Agreement (“Confidential Financial Information”). Notwithstanding the above, the following are exceptions to keeping the information confidential:

i)the Company may disclose Confidential Financial Information to investors or potential investors and regulatory agencies like the FDA and SEC, and

ii)Columbia may disclose Confidential Financial Information to regulatory agencies including without limitation the NIH, to the U.S. or foreign courts, to administrative tribunals, to third-party supporters of the research that led to the development of the intellectual property licensed under this Agreement to the Company, to recipients that share in the license revenue generated under this Agreement, and to potential investors in the equity or royalty stream due to Columbia under this Agreement, and

iii)Columbia may publicly disclose Confidential Financial Information on the condition that the disclosure is done in a manner so that a third party would not be able to attribute the Confidential Financial Information to the Company or this Agreement.

d.Exceptions. The obligations of confidentiality under this Section 7 do not apply to any Patents, Materials, or Technical Information that the Company demonstrates was any of the following:

(i)was known to the Company before receipt thereof from Columbia;

(ii)was or became a matter of public information or publicly available through no act or failure to act on the part of the Company;

(iii)was acquired by the Company from a third party entitled to disclose it to the Company; or

(iv)was discovered or developed independently by the Company without reference to or use of the Patents, Materials, or Technical Information, as evidenced by contemporaneous written records.

e.Defend Trade Secrets Act. Notwithstanding the preceding, under 18 U.S.C. §1833(b), “An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Nothing in this Agreement or any Columbia policy is intended to conflict with this statutory protection, and no Columbia trustee, director, officer, or member of management has the authority to impose any practice to the contrary.

Disclaimer of Warranty; Limitations of Liability.

a.Disclaimer. Columbia is licensing the Patents, Materials, Technical Information, and the subject of any other license under this Agreement, on an “as is” basis. Each party agrees and acknowledges that, except as expressly set forth in this agreement , neither party makes any representations or warranties of any kind whatsoever, implied or statutory with respect to any of the Patents, Materials, Technical Information, Products or anything discovered, developed, manufactured, used, sold, offered for sale, imported, exported, distributed, rented, leased or otherwise disposed of under any license granted

under this Agreement, and each party hereby expressly disclaims all such representations and warranties, implied or statutory, including but not limited to any implied warranties of merchantability, fitness for a particular purpose, title, any warranties as to the validity of any Patent; and any warranties of freedom from infringement of any domestic or foreign patents, copyrights or other proprietary rights of any third party.

b.Limitations of Liability. In no event will Columbia or its trustees, officers, faculty members, students, employees, and agents have any liability to the Company, the Sublicensees, the Designees, or the Affiliates of the preceding, or any Third Party arising out of the use, operation or application of the Patents, Technical Information, Materials, Products, or anything discovered, developed, manufactured, used, sold, offered for sale, imported, exported, distributed, rented, leased or otherwise disposed of under any license granted under this Agreement by the Company, the Sublicensees, the Designees or the Affiliates of the preceding, or any Third Party for any reason, including but not limited to, the unmerchantability, inadequacy or unsuitability of the Patents, Materials, Technical Information, Products and anything discovered, developed, manufactured, used, sold, offered for sale, imported, exported, distributed, rented, leased or otherwise disposed of under any license granted under this Agreement for any particular purpose or to produce any particular result, or for any latent defects therein.

c.Damages. In no event will Columbia, or its trustees, officers, faculty members, students, employees, and agents be liable to the Company, the Sublicensees, the Designees or the Affiliates of the preceding, or any Third Party, for any consequential, incidental, special or indirect damages (including, but not limited to, from any destruction to property or from any loss of use, revenue, profit, time or goodwill) based on activity arising out of or related to this Agreement, whether under a claim for breach of contract or any other claim of any type.

d.Liability Limit. Except for fraud or willful misconduct, in no event will Columbia’s liability to the Company, exceed the payments made to Columbia by the Company under this Agreement. Except in connection with Company’s indemnification obligations under Section 12(a), in no event will Company’s liability to Columbia exceed the payments made to Columbia by the Company under this Agreement.

e.Essentiality. The parties to this Agreement acknowledge that the limitations and exclusions of liability and disclaimers of warranty in this Agreement form an essential basis of the bargain between the parties.

Prohibition Against Use of Names.

The Company shall not use the name, insignia, or symbols of Columbia, its faculties or departments, or any variation or combination thereof, or the name of any trustee, faculty member, any other employee, or student of Columbia for any purpose whatsoever without Columbia’s prior written consent. Columbia shall not mention or otherwise use the name, logo, or trademark of the Company or any of its Affiliates (or any abbreviation or adaptation thereof) for any purpose whatsoever without the Company’s prior written consent.

10.

Compliance with Governmental Obligations.

a.Disclaimer. Notwithstanding any provision in this Agreement, Columbia disclaims any obligation or liability arising under this Agreement if the Company or its Affiliates is charged in a governmental action for not complying with or does not comply with governmental regulations in the course of taking steps to bring any Product to a point of practical application.

b.Requests. The Company and its Affiliates shall comply upon reasonable notice from Columbia with all governmental requests directed to either Columbia or the Company or its Affiliates and provide all information and assistance necessary to comply with the governmental requests.

c.Compliance. The Company and its Affiliates shall ensure that research, development, manufacturing, and marketing under this Agreement complies with all government regulations in effect including, but not limited to, Federal, state, and municipal legislation.

11.

Patent Prosecution and Maintenance; Litigation.

a.Prosecution. Columbia, by counsel it selects to whom the Company has no reasonable objection, in consultation with the Company and any counsel appointed by the Company, shall prepare, file, prosecute and maintain all Patents in Columbia’s name and in countries designated by the Company. Columbia shall instruct its patent counsel (i) to copy the Company on all correspondence related to Patents (including copies of each patent application, office action, response to an office action, request for terminal disclaimer, and request for reissue or re-examination of any patent or patent application) and (ii) as requested by the Company, to provide an update as to the current status of all Patents. The parties intend that consultation between the parties relating to the Patents under this Section 11 will be in accordance with a common interest in the validity, enforceability and scope of the Patents. Each party shall treat the consultation, along with any information disclosed by each party in connection with the consultation (including any information concerning patent expenses), on a confidential basis, and shall not disclose the consultation or information to any party without the other party’s prior written consent. If the Company seeks to challenge the validity, enforceability, or scope of any Patent, Columbia’s consultation obligation under this Section 11a terminates. Any such termination will not affect the Company’s confidentiality and nondisclosure obligations concerning consultation or disclosure of information before the termination, and will not affect any other provisions of this Agreement (including the Company’s reimbursement obligation under Section 11b).

b.Reimbursement. The Company shall reimburse Columbia for patent expenses as follows:

(i)The Company shall reimburse Columbia for the actual fees, costs, and expenses Columbia has incurred before, on and after the Effective Date in preparing, filing, prosecuting and maintaining the Patents (and those patents and patent applications to which Patents claim priority), including without limitation, legal fees, the costs of any interference

proceedings, oppositions, re-examinations, or any other ex parte or inter partes administrative proceeding before patent offices, taxes, annuities, issue fees, working fees, maintenance fees, and renewal charges (collectively “Patent Expenses”).

(ii)Unreimbursed Patent Expenses that Columbia incurred for legal activities occurring before May 31, 2020 are “Past Patent Expenses.”

(iii)Columbia, using reasonable efforts, estimates that unreimbursed Patent Expenses for legal activities occurring before May 31, 2020 are $3,400 (“Estimated Past Patent Expenses”). The Company shall reimburse Columbia in full no later than ten (10) business days after the Effective Date.

(iv)The Company will pay any additional unreimbursed Past Patent Expenses within fourteen (14) days after receiving an invoice from Columbia for the additional Past Patent Expenses.

(v)The Company will reimburse Columbia for unreimbursed Patent Expenses incurred by Columbia after the Past Patent Expenses (“Future Patent Expenses”) no later than thirty (30) days after receiving Columbia’s invoice.

(vi)At Columbia’s election, Columbia may require advance payment of a reasonable estimate of Future Patent Expenses (“Estimated Future Patent Expense”). Columbia may require the Company to make the payment up to three (3) months before the date Columbia has chosen for the legal work to be completed. In any event, Columbia shall give at least fourteen (14) days’ notice to the Company before the date the advance payment is due. Columbia may credit any unused balance towards future Patent Expenses, or upon the Company’s written request, Columbia shall return the unused balance to the Company. No later than thirty (30) days after receiving an invoice from Columbia for any Patent Expenses incurred over the reasonable estimate, the Company shall reimburse Columbia for the excess amount.

(vii)If the Company does not pay Columbia the Patenting Expenses for any Patent as required by this Section 11b when due, Columbia may in its discretion and upon providing notice to the Company take any of the following actions:

(A)abandon any or all Patent(s),

(B)convert the license for any or all Patents to non-exclusive, or

(C)continue to prosecute any or all of the Patents at its own expense, in which case the Company has no further rights to those patents under this Agreement.

c.Litigation. Subject to Sections 11d and 11f, Columbia may initiate, control, defend and settle any proceedings involving the validity, enforceability, or infringement of any Patents when, in its judgment, any such action may be necessary, proper, and justified, provided, however, that Columbia shall promptly notify the Company in writing prior to taking such action, and Columbia may not settle any action or otherwise consent to an adverse judgment in such action that diminishes the rights or interests of the Company under this Agreement without the prior written consent of the Company, which consent shall not be unreasonably withheld, conditioned or delayed.

d.Initiation. Upon written notice to Columbia, the Company may request that Columbia take steps to stop a third party who is selling a product that does or will compete with a Product sold or being developed by the Company or any of its Affiliates (but not a Sublicensee, or Sublicensee Affiliate) (“Third-Party Infringer”) from infringing an issued patent falling within the definition of Patents. Provided, however, for the notice to be effective, the Company shall provide written evidence demonstrating prima facie infringement of specific claims of that Patent. The Company may initiate legal proceedings against any such Third-Party Infringer in the Company’s name and at the Company’s sole expense, unless Columbia, not later than sixty (60) days after receipt of the notice, either (i) causes that infringement to cease or (ii) initiates legal proceedings against the Third-Party Infringer. The Company shall provide all assistance reasonably requested by Columbia. The Company shall not make any admission or assert any position in any legal or administrative proceeding that is inconsistent with or adverse to any position asserted by Columbia in any proceedings against the Third-Party Infringer, without Columbia’s prior written consent. Columbia has no obligation to assert more than one Patent in one jurisdiction against the Third-Party Infringer. Any proposed disposition or settlement of a legal proceeding filed by the Company to enforce any issued patent falling within the definition of Patents against any Third-Party Infringer is subject to Columbia’s prior written approval. Columbia shall not unreasonably withhold or delay its approval. The Company’s rights under this Section 11d apply only to claims of Patents that are exclusively licensed to the Company under this Agreement and only in the Field and Territory that are exclusively licensed to the Company under this Agreement.

e.Sharing. Under a legal proceeding initiated under Section 11d, the initiating party shall first use any recovery, whether by way of settlement or judgment, from a third party to reimburse itself for its actual fees, costs and expenses incurred in connection with that proceeding. The initiating party shall divide any remaining amounts from any such settlement or judgment as follows: (i) Columbia shall retain or receive, as applicable, the royalty that it would have received under Section 4b(iii) had those activities been performed by the Company, and (ii) all other remaining amounts (including any punitive or exemplary damages) shall be divided 75% to the party who initiated or carried on the proceedings and 25% to the other party.

f.Cooperation. If a party initiates or defends a legal proceeding concerning any Patent under this Section 11, the other party shall cooperate fully with and supply all assistance reasonably requested by the party initiating the proceeding, including without limitation, joining the proceeding as a party if requested. The party that institutes any legal proceeding concerning any Patent under this Section 11 shall have sole control of that proceeding, subject to the requirements of 11c.

12.

Indemnity and Insurance.

a.Indemnity. The Company hereby indemnifies and shall defend and hold harmless Columbia, its trustees, officers, faculty, employees, students, and agents, from and against all actions, suits, claims, demands, prosecutions, liabilities, costs, expenses, damages, deficiencies, losses or obligations (including legal fees) based on, arising out of, or relating to this Agreement, including, without limitation, the following:

(i)the discovery, development, manufacture, packaging, use, sale, offering for sale, importation, exportation, distribution, rental or lease of Products, even if altered for use for a purpose not intended;

(ii)the use of Patents, Materials or Technical Information by the Company, Sublicensees, Designees, or their Affiliates or customers;

(iii)any representation made or warranty given by the Company, Sublicensees, Designees, or their Affiliates concerning Products, Patents, Materials or Technical Information;

(iv)any infringement claims relating to Products, Patents, Materials, or Technical Information; and

(v)any asserted violation of the Export Laws (as defined in Section 14) by the Company, Sublicensees, Designees, or their Affiliates. The Company shall reimburse Columbia for the actual fees, costs, and expenses (including legal fees) that it incurs in enforcing this provision.

b.Insurance. The Company shall maintain commercial general liability insurance (including product liability and contractual liability insurance) for the Company’s indemnity obligations under Section 12a with reputable and financially secure insurance carriers reasonably acceptable to Columbia to cover the activities of the Company, Sublicensees, Designees, and their Affiliates, for minimum limits of $5,000,000 combined single limit for personal injury and property damage per occurrence and in the aggregate. The Company shall contract for the insurance to include Columbia, its trustees, faculty, officers, employees and agents as additional insureds. Upon Columbia’s reasonable request, the Company shall furnish a certificate of insurance evidencing that coverage. The minimum amounts of insurance coverage required under this Agreement are deemed not to be construed as creating any limitation on the Company’s indemnity obligation under Section 12a of this Agreement.

c.Primacy. The Company’s insurance is primary coverage; any insurance Columbia may purchase is in excess of the Company’s insurance and noncontributory. The Company shall contract for the Company’s insurance to be written to cover claims incurred, discovered, manifested, or made during or after the expiration of this Agreement.

d.Compliance. The Company shall comply with all statutory workers’ compensation and employers’ liability requirements covering its employees concerning activities performed under this Agreement.

13.

Marking.

The Company shall, and shall require its Affiliates and Sublicensees, to mark Products developed, manufactured or sold hereunder in accordance with the applicable law, which may include, at the Company’s discretion and subject to its reasonable business judgement, marking Product packaging, marking the Product itself, or virtual marking of the Product.

14.

Export Control Laws.

a.Compliance. The Company shall comply with U.S. export laws and regulations about the export of technical data, services, and commodities, including the International Traffic in Arms Regulations (22 C.F.R. § 120 et seq.), the Export Administration Regulations (15 C.F.R. § 730 et seq.), the regulations administered by the Treasury Department’s Office of Foreign Assets Control (31 C.F.R. § 500, et seq.), and the Anti-Boycott Regulations (15 C.F.R. § 760) (individually and collectively, “Export Laws”). The parties shall cooperate with each other to facilitate compliance with these laws and regulations.

b.Non-U.S. Persons. The Company understands that sharing controlled technical data with non-U.S. persons is an export to that person’s country of citizenship that is subject to U.S. export laws and regulations, even if the transfer occurs in the United States. The Company shall obtain any necessary U.S. government license or other authorization required under the U.S. export control laws and regulations for the export or re-export of any commodity, service or technical data covered by this Agreement, including technical data acquired from Columbia under this Agreement and products created as a result of that data.

15.

Breach and Cure.

a.Breach. In addition to applicable legal standards, the Company is deemed to be in material breach of this Agreement if it should commit any of the following: (i) failure to pay fully and promptly amounts due under Section 4 (including without limitation, the minimum royalties under subsection 4b(iii)(B) and any payments required under subsection 4h) and payable under Section 5; (ii) failure of the Company to meet any of its obligations under Section 6 of this Agreement; (iii) failure to comply with governmental requests directed to Columbia or the Company under Section 10b; (iv) failure to reimburse Columbia for Patent Expenses under Section 11; (v) failure to obtain and maintain insurance in the amount and of the type provided for in Section 12; and (vi) failure to comply with the Export Laws under Section 14.

b.Cure. Either party may cure its material breach. The right to cure expires if not effected within a reasonable period but in no event later than sixty (60) days after notice of any breach given by the non-breaching party.

16.

Term of Agreement.

a.Term. Unless terminated earlier under any provision of this Agreement, the term of the licenses granted under this Agreement extend on a country-by-country and product-by-product basis until the latest of (i) the date of expiration of the last to expire of the issued patents falling within the definition of Patents, (ii) ten (10) years after the first bona fide commercial sale of a Product in the country in question, or (iii) expiration of any market exclusivity period granted by a regulatory agency for a Product. For clarity, upon expiration of the term pursuant to this Section 16a, all licenses granted to the Company under this Agreement shall be deemed to be fully paid-up and perpetual solely with respect to such product in such country and Company shall have no further royalty obligation on the Net Sales of such product in such country.

b.Termination by Columbia. The licenses granted under this Agreement may be terminated by Columbia or, at Columbia’s option, Columbia has the right to convert any or all of the exclusive licenses granted under this Agreement to non-exclusive licenses, with no right to sublicense, and no right by the Company to initiate legal proceedings under Section 11, as follows:

(i)upon written notice to the Company of Columbia’s election to terminate under Section 6b(i);

(ii)upon written notice to the Company for the Company’s material breach of the Agreement and the Company’s failure to cure that material breach under Section 15b;

(iii)if the Company becomes insolvent or is generally not paying its debts as its debts become due;

(iv)if the Company ceases to conduct business as a going concern; and

(v)if the Company (or any entity or person acting on its behalf) initiates any proceeding or otherwise asserts any claim challenging the validity or enforceability of any Patent in any court, administrative agency or any other forum.

Termination under (ii) – (v) is effective upon the date the notice is sent under Section 17.

c.Termination by the Company. After the Company has fulfilled its upfront payment obligations under Section 4b(i), the Company may terminate this Agreement for no reason or for any reasons upon sixty (60) days’ written notice to Columbia. For the avoidance of doubt, if an Entity is selling Product(s) prior to such termination, Company shall cease and cause all Entities to cease (subject, in the case of Sublicensees, to Section 16d) all sales of Product(s) upon the date of termination.

d.Assignment of Sublicenses Upon Termination. Upon any termination of this Agreement under Section 16c, the Company shall assign to Columbia all sublicenses granted by the Company, upon request, and at Columbia’s discretion, on the condition that Columbia’s obligations under any such sublicense are consistent with and not exceed Columbia’s obligations to the Company under this Agreement and on the condition that any such Sublicensee agrees in a writing sent to Columbia to assume all obligations of this Agreement for the benefit of Columbia, including the obligations to make all payments due under this Agreement, including but not limited to those specified in Section 4b, 4c, 4d, 4h and 11b.

e.Survival. Sections 4e (Challenge), 5c (Final Payment), 5f (Records), 5g (Self Audit), 5h (Late Payment), 5i (Collection Costs), 7 (Confidentiality), 8 (Disclaimer), 9 (Use of Name), 10 (Compliance), 12 (Indemnity and Insurance), 14 (Export Laws), 16a (Term), 16d (Assignment), 16e (Survival), 16f (Accrued Rights and Obligations), 16g (Inventory), 16h (Manufactured), 17 (Notices), 19 (Remedies), 22 (Entire Agreement), 23 (Severability), and 25 (Governing Law) will survive any termination or expiration of this Agreement.

f.Accrued Rights and Obligations. The expiration or any termination of this Agreement does not adversely affect any rights or obligations that have accrued to either party before the date of termination, including without limitation, the Company’s obligation to pay all

amounts due and payable under Sections 4 (including the minimum royalties accrued under subsection 4b(iii)(B) and any payments required under subsection 4e, 5, and 11.

g.Inventory. Upon any termination of this Agreement for any reason other than the expiration of this Agreement under Section 16a or the Company’s failure to cure a material breach of this Agreement under Section 16c(ii), the Company, Sublicensees, Designees, and their Affiliates may, for one year or a longer period as the parties may reasonably agree, dispose of Products or substantially completed Products then on hand, and complete orders for Products then on hand (the “Inventory”), and shall pay Columbia the royalties for the Inventory as though this Agreement had not terminated. Within thirty (30) days after termination, the Company shall provide Columbia with an Inventory report. If this Agreement expires under Section 16a, then the Company is free after that to use the Technical Information and Materials without any further obligation to Columbia.

h.Manufactured Under Patent. Notwithstanding anything to the contrary in the Agreement, to the extent the manufacture of a Product is Covered By an issued patent within the definition of Patents and occurs before the expiration of that issued Patent, the sale of that Product after the expiration date of the issued Patent still constitutes a royalty-bearing sale under Section 4.

17.Notices. Any notice required or permitted to be given under this Agreement is sufficient if in writing and is considered given (a) when mailed by certified mail (return receipt requested), postage prepaid, or (b) on the date of actual delivery by hand or overnight delivery, with receipt acknowledged, as follows:


if to Columbia, to:	Executive Director
	Columbia Technology Ventures
	Columbia University
	80 Claremont Avenue, #4F, Mail Code 9606
	New York, NY 10027-5712

copy to:	General Counsel
	Columbia University
	412 Low Memorial Library
	535 West 116^th Street, Mail Code 4308
	New York, New York 10027

if to the Company, to:	Henry Ji, Ph.D., President & CEO
	Sorrento Therapeutics, Inc.
	4955 Directors Place
	San Diego, CA 92121

copy to:	General Counsel
	Sorrento Therapeutics, Inc.
	4955 Directors Place
	San Diego, CA 92121

or to another address as a party may specify by notice under this Agreement.

Provided, however, except for notices of breach, Columbia may send invoices related to license fees and patent expenses to the following email address: [...***...]; provided, further, except for notices of breach, Columbia may send correspondence related to the Patents in accordance with Section 11 to the following email address: [...***...].

18.Assignment. This Agreement and all rights and obligations under this Agreement may not be assigned by either party without the written consent of the other party, except that a party may make such an assignment without the other party’s consent to an assignee or successor to substantially all of the business of such party to which this Agreement relates, whether in a merger, sale of stock, sale of assets or other transaction. Any such assignment to a permitted successor or assignee of rights and/or obligations hereunder shall be subject to such permitted successor or assignee providing written notice to the other party within five business days of such assignment, expressly assuming performance of the rights and/or obligations under this Agreement. Any permitted assignment shall be binding on the successors of the assigning party. Any assignment or attempted assignment by either party in violation of the terms of this Section 18 shall be null, void and of no legal effect.

19.Waiver and Election of Remedies. The failure of any party to insist upon strict adherence to any term of this Agreement on any occasion will not be considered a waiver or deprive that party after that of the right to insist upon strict adherence to that term or any other term of this Agreement. All waivers must be in writing and signed by an authorized representative of the party against which the waiver is being sought. The pursuit by either party of any remedy to which it is entitled at any time or continuation of the Agreement despite a breach by the other will not be deemed an election of remedies or waiver of the right to pursue any other remedies to which it is entitled.

20.Binding on Successors. This Agreement is binding upon and inures to the benefit of the parties and their successors and assigns to the extent assignment is permitted under this Agreement.

21.Independent Contractors. It is the express intention of the parties that the relationship between Columbia and the Company is that of independent contractors and is not that of agents, partners, or joint venturers. Nothing in this Agreement is intended or will be construed to permit or authorize either party to incur or represent that it has the power to incur any obligation or liability on behalf of the other party.

22.Entire Agreement; Amendment. This Agreement sets forth the entire agreement between the parties concerning the subject matter of this Agreement and supersedes all previous agreements, written or oral, concerning that subject matter. To be effective, an amendment to this Agreement must be in writing and duly executed by the parties.

23.Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be unenforceable because it is invalid, illegal or unenforceable, the validity of the remaining provisions will not be affected, and the rights and obligations of the parties will be construed and enforced as if the Agreement did not contain the particular provisions held to be

unenforceable unless that construction would materially alter the meaning of this Agreement. By way of example, but not by way of limitation, Sections 4e(i), 4e(ii) and 4e(iii) are intended by the Company and Columbia to be severable from each other, such that if one clause is found to be unenforceable, the other clauses remain operative and in effect.

24.No Third-Party Beneficiaries. Except as expressly set forth in this Agreement, this Agreement has no third-party beneficiaries.

25.Governing Law. This Agreement is governed and construed under the internal substantive laws of the State of New York that apply to agreements made and wholly performed within the State of New York and without reference to the conflict or choice of laws principles of any jurisdiction. Unless otherwise separately agreed in writing, any claims arising under or related to this Agreement will be heard and determined only in either the United States District Court for the Southern District of New York or in the courts of the State of New York located in the City and County of New York, and the parties shall irrevocably submit themselves to the exclusive and personal jurisdiction of those courts and irrevocably waive any rights that any party may now or hereafter have to object to such jurisdiction or the convenience of the forum.

26.Execution in Counterparts; Fax or Electronic Transmission. This Agreement may be executed in counterparts and by fax or electronic transmission. This Agreement is not binding on the parties until it has been signed below on behalf of each party.

IN WITNESS WHEREOF, Columbia and the Company have caused this Agreement to be executed by their duly authorized representatives as of the day and year that is first written above.


THE TRUSTEES OF COLUMBIA
UNIVERSITY IN THE CITY OF NEW YORK

By	/s/ Scot G. Hamilton
	Scot G. Hamilton
	Executive Director,
	Columbia Technology Ventures

	TTS# 56390


SORRENTO THERAPEUTICS, INC.

By	/s/ Henry Ji, Ph.D.
	Henry Ji, Ph.D.

Title	President & CEO

Date	July 23, 2020

Exhibit 10.3

MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH

PATENT AND KNOW-HOW LICENSE AGREEMENT

This Patent and Know-How License Agreement (“Agreement”) is by and between Mayo Foundation for Medical Education and Research, a Minnesota charitable corporation, located at 200 First Street SW, Rochester, Minnesota 55905-0001 (“MAYO”), and Sorrento Therapeutics, Inc. (“SORRENTO”), a for-profit corporation, having a place of business at4955 Directors Place, San Diego, CA 92121, each a “Party”, and collectively “Parties”.

WHEREAS, MAYO desires to make its intellectual and tangible property rights available for the development and commercialization of products, methods and processes for public use and benefit;

WHEREAS, SORRENTO represents itself as being knowledgeable in developing and commercializing nanoparticle therapeutics and antibody drug conjugates; and

WHEREAS, MAYO is willing to grant and SORRENTO is willing to accept a royalty-bearing license under such rights for the purpose of developing such technology.

NOW THEREFORE, in consideration of the foregoing and the terms and conditions set forth below, the Parties hereby agree as follows:

Article 1.00 – Definitions

For purposes of this Agreement, the terms defined in this Article will have the meaning specified and will be applicable both to the singular and plural forms:

1.01For MAYO, “Affiliate” means any corporation or other entity within the same “controlled group of corporations” as MAYO or its parent MAYO Clinic. For purposes of this definition, the term “controlled group of corporations” will have the same definition as Section 1563 of the Internal Revenue Code as of November 10, 1998, but will include corporations or other entities which if not a stock corporation, more than fifty percent (50%) of the board of directors or other governing body of such corporation or other entity is controlled by a corporation within the controlled group of corporations of MAYO or Mayo Clinic. MAYO’s Affiliates include, but are not limited to: Mayo Clinic; Mayo Collaborative Services, LLC; Mayo Clinic Hospital, Rochester; Mayo Clinic Florida; Mayo Clinic Arizona; and its Mayo Clinic Health System entities.

For SORRENTO, “Affiliate” means any corporation or other entity that controls, is controlled by, or is under common control with, SORRENTO. For purposes of this definition, “control” means ownership of: (a) at least fifty percent (50%) of the outstanding voting securities of such entity; or (b) at least fifty percent (50%) of the decision-making authority of such entity.

page 2 of 37

1.02 “Applicable Law” means all federal, state, local, national and supra-national laws, statutes, rules and regulations, including any rules, regulations, guidelines or requirements of Regulatory Authorities, national securities exchanges or securities listing organizations that may be in effect from time to time during the Term and applicable to a particular activity hereunder.

1.03 “Combination Product” means a Royalty-Bearing Product that includes one or more pharmaceutically active ingredients, components, delivery devices or products in addition to the product or component that would otherwise qualify as a Royalty-Bearing Product. For the avoidance of doubt, a Combination Product does not include an antibody drug conjugate or nanoparticle therapeutic.

1.04 “Commercially Reasonable Efforts” means efforts and the deployment of a quantity and quality of resources consistent with the exercise of diligent efforts and reasonable and prudent scientific and business judgment, as applied to other pharmaceutical products of similar potential, characteristics, and market size by the pharmaceutical industry.

1.05 “Completion” means, with respect to any Clinical Study, the final review by a Regulatory Authority for a given clinical trial for each Licensed Product.

1.06“Confidential Information” means all proprietary unpublished or nonpublic information or materials including, but not limited to, written, oral or virtually presented information and such items as electronic media products, trade secrets, financial information, equipment, databases and the like provided by one Party to the other under this Agreement, or which is observed by a Party while on the other Party’s premises. Confidential Information does not include any information or material that receiving party evidences is or becomes: (a) already known to the receiving party at the time of disclosure (other than from the disclosing party); (b) publicly known other than through acts or omissions of the receiving party; (c) disclosed to the receiving party by a third party who was not and is not under any obligation of confidentiality; or (d) independently developed by employees of the receiving party without knowledge of or access to the Confidential Information. Confidential Information shall include, but is not limited to, the data room and unpublished patent applications related to this Agreement and provided to SORRENTO by MAYO prior to the Effective Date.

1.07“Effective Date”: September 8, 2020.

1.08“Exploit and/or Exploitation” means, with respect to an item of intellectual property, to (a) reproduce, create derivative works of, distribute, publicly perform, publicly display, digitally transmit, and otherwise commercialize and exploit such intellectual property in any medium or format, whether now known or hereafter discovered; (b) use, make, have made, sell, offer to sell, import, and otherwise commercialize and exploit any product or service based on, embodying, incorporating or derived from such intellectual property; and/or (c) subject to the terms and conditions of this Agreement, to exercise any and all other present or future rights in such intellectual property.

1.09“Field” means for the prevention, diagnosis and/or treatment of human diseases and conditions.

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1.10“First Commercial Sale” means with respect to a given Royalty-Bearing Product in a particular country, means the first sale to a third party of such Royalty-Bearing Product in such country, after obtaining all required Regulatory Approvals in such country. For the avoidance of doubt, “First Commercial Sale” shall not include the supply of any unreimbursed Royalty-Bearing Product in reasonable quantities taking all relevant factors into consideration for use in research or development (including clinical trials), donated for promotional, advertising or other purposes or for compassionate use.

1.11 “Initiation” means, with respect to any clinical trial, the date of the first dosing of a human subject of a given clinical trial for a Licensed Product.

1.12“Know-How” means research and development information, written materials, unpatented inventions, trade secrets, know-how, data (whether pre-clinical, clinical or otherwise), specifications, compositions, formulae, compounds, protocols, and any other supportive information or technology of any Mayo Investigator or Dr. Markovic’s laboratory related to targeted nanoparticle therapeutics and/or antibody drug conjugates, owned or controlled by MAYO or any of its Affiliates as of the Effective Date, including any of the foregoing (i) that is reasonably necessary or useful for the development or Exploitation of any Licensed Products or (ii) described in Mayo disclosures listed in Exhibit A.

1.13“Licensed IP” means Know-How, Patent Rights and Materials.

1.14“Licensed Product” means any product or process or related service: (a) described by a pending claim of the Patent Rights; (b) the Exploitation of which is covered by an issued claim of the Patent Rights or Regulatory Exclusivity; or (c) the development or Exploitation of which incorporates, uses, was derived from, identified by, validated or developed in whole or in part using the Know-How or Materials.

1.15“Mayo Investigator(s)” means [...***...].

1.16“Materials” means all tangible property provided by Mayo to Sorrento, which shall include cell lines, antibodies, abraxane (nab) materials, proteins, and other materials developed in the laboratory of Dr. Markovic related to the technologies listed in Exhibit A or developed through future funding by Sorrento or any of its Affiliates.

1.17“Net Sales” means the gross amount actually received by SORRENTO, its Affiliates or, in the case of a permitted sublicense, a Sublicensee (each, a “Selling Party”) for the sale or transfer of a Royalty-Bearing Product to a third party customer, less [...***...]. Each of the foregoing deductions shall be determined as occurred in the ordinary course of business in accordance with GAAP.

Except as provided herein, [...***...] shall be deemed a transfer for the purpose of determining Net Sales. Net Sales on Royalty-Bearing Products transferred as part of a non-cash exchange shall be calculated at [...***...]. In the event that SORRENTO transfers Royalty-Bearing Products to an Affiliate, and the Affiliate retransfers the Royalty-Bearing Products to third-party customers, then Net Sales shall be [...***...]. Royalty-Bearing Products transferred to MAYO or its Affiliates or for [...***...] are not considered for purposes of determining Net Sales or for calculating Earned Royalties. In addition, Royalty-Bearing Products [...***...] shall not be included in Net Sales.

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For the avoidance of doubt, amounts received by a Selling Party [...***...] shall not constitute amounts received by a Selling Party for the sale of Royalty-Bearing Product and shall not be included in any calculation of Net Sales hereunder. For the avoidance of doubt, upon an assignment of this Agreement by SORRENTO, any modifications to this Agreement would require MAYO approval.

1.18“Patent Rights” means those patent and patent applications listed on Exhibit B, and provisionals, divisionals, continuations, and continuations-in-part (but only for subject matter supported pursuant to 35 U.S.C. §112 by the foregoing) therefrom, patents issuing thereon, re-examinations and re-issues thereof, as well as extensions and supplementary protection certificates and any foreign counterpart of any of the foregoing.

1.19“Person” means any individual, person, entity, general partnership, limited partnership, limited liability partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative, association, foreign trust, foreign business organization or a governmental entity.

1.20“Phase I Clinical Study” means the first human clinical trial phase I study of a Licensed Product, sponsored by SORRENTO, the principal purpose of which is preliminary determination of safety in healthy individuals or patients to satisfy the requirements of 21 C.F.R. §312.21(a), or any other requirements, or a similar clinical study prescribed by the Regulatory Authorities in a country other than the United States. Such phase I clinical trial shall be deemed to have commenced when such Licensed Product is first administered to any patient enrolled in such phase I clinical trial.

1.21“Phase II Clinical Trial” means the first human clinical trial phase II study, including the phase II portion of a phase I/II trial, of a Licensed Product, sponsored by SORRENTO, the principal purpose of which is preliminary evaluation of clinical efficacy and safety, and/or to obtain an indication of the dosage regimen required as more fully defined in 21 C.F.R. §312.21(b), or a similar clinical study prescribed by the Regulatory Authorities in a country other than the United States. Such phase II clinical trial shall be deemed to have commenced when such Licensed Product is first administered to any patient enrolled in such phase II clinical trial.

1.22“Phase III Clinical Study” means the first human clinical trial phase III study, including the phase III portion of a phase II/III, of a Licensed Product, sponsored by SORRENTO, the principal purpose of which is to establish safety and efficacy in patients with the disease being studied in a manner sufficient to file for Regulatory Approval of such product and would satisfy the requirements of 21 C.F.R. §312.21(c), or a similar clinical study prescribed by the Regulatory Authorities in a country other than the United States. Such phase III clinical trial shall be deemed to have commenced when such Licensed Product is first administered to any patient enrolled in such phase III clinical trial.

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1.23“Regulatory Approval” means, in any given country, the granting by the Regulatory Authorities in that country of all approvals that are necessary for the manufacturing, distributing, marketing, sale, pricing and reimbursement of a drug product.

1.24“Regulatory Authority(ies)” means any federal, state or local regulatory agency, department, bureau or other government entity, including without limitation the FDA, EMEA or PMDA, which has responsibility for granting any licenses or approvals or granting pricing and/or reimbursement approvals necessary for the marketing and sale of a Licensed Product in any country.

1.25“Regulatory Exclusivity” means, with respect to any country in the Territory, an additional market protection, other than those covered under the Patent Rights, granted by a Regulatory Authority in such country which confers an exclusive commercialization period during which SORRENTO or its Affiliates or any Sublicensees have the exclusive right to market and sell a Licensed Product in such country on an exclusive basis, including, but not limited to: new chemical entity exclusivity, new use or indication exclusivity, new formulation exclusivity, orphan drug exclusivity, pediatric exclusivity, or any applicable data exclusivity and any international equivalents.

1.26“Royalty-Bearing Product” means any Licensed Product in the Field sold by SORRENTO or its Affiliates or Sublicensees to an unrelated third party on an arms-length basis.

1.27“Royalty Term” means, on a Royalty-Bearing Product-by-Royalty-Bearing Product and country-by-country basis, the period beginning on the First Commercial Sale of a Royalty-Bearing Product in a given country and ending upon the later of (a) the expiration date of the last to expire of the valid claim in any issued Patent Rights or Regulatory Exclusivity that cover such Royalty-Bearing Product in such country; or (b) the tenth anniversary of the First Commercial Sale of such Royalty-Bearing Product in such country.

1.28“Sublicensee” means any third party to whom SORRENTO has granted a sublicense of the licensed rights granted to SORRENTO pursuant to Section 2.01 or conveyed the forbearance of suit under the Patent Rights, Know-How or Materials.

1.29“Sublicense Income” means consideration in any form received by SORRENTO from each Sublicensee for the express sublicense of or a covenant not to sue the rights granted under Section 2.01, excluding any royalties based on the sale of Royalty-Bearing Products. Sublicense Income shall include all fees, payments, equity, research and development funding in excess of SORRENTO’s reasonable and documented costs of performing such research and development, and any consideration received for an equity interest in, extension of credit to, or other investment in SORRENTO, to the extent such consideration is expressly attributable to the grant of any sublicense of or a covenant not to sue the rights granted under Section 2.01 to a Sublicensee.

1.30“Territory” means Worldwide.

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Article 2.00 – Grant of Rights

2.0lGRANT. Subject to the terms and conditions of this Agreement, MAYO grants to SORRENTO: (a) an exclusive (even as to MAYO and its Affiliates, subject to Section 2.02) license with the right to sublicense (through multiple tiers), within the Field and Territory, under the Patent Rights and Materials to Exploit Licensed Products; and (b) a nonexclusive license, with the right to sublicense, within the Field and Territory, to use the Know-How to Exploit Licensed Products. The foregoing licenses and rights shall be irrevocable (except as otherwise provided herein), transferrable (subject to Section 11.11 hereof or as permitted or required under any Applicable Law), and include the right of any third party to exercise the foregoing rights and licenses for, on behalf of, or for the benefit of SORRENTO.

During the thirty (30) days following the last signature hereto, MAYO will provide reasonable assistance to SORRENTO, including access to necessary personnel to transfer Know-How and Materials, but in no event shall MAYO be required to provide any Know-How or Materials in tangible form if it does not exist in tangible form as of the Effective Date. After such thirty (30) day period if SORRENTO requires any additional transfer of Know-How or Materials then the Parties will enter into a mutually acceptable agreement for such transfer. For avoidance of any doubt, all costs and expenses related to such transfer assistance, including the cost and time Mayo Investigator(s) incur transferring the Know-How and/or Materials, will be borne solely by MAYO and not SORRENTO up to twenty four (24) hours. Any such reasonable costs or expenses in excess of such number of hours that are pre-approved by SORRENTO shall be borne by SORRENTO.

2.02RESERVATION OF RIGHTS. All rights herein are subject to: (a) the rights and obligations to and requirements of the U.S. government, if any have arisen or may arise, regarding the Patent Rights, including as set forth in 35 U.S.C. §§200 et al., 37 C.F.R. Part 401 et al. (“Bayh-Dole Act”); and (b) MAYO’s and its Affiliates’ reserved, irrevocable right to practice and have practiced the Patent Rights and Materials for non-commercial purposes in connection with the educational, research and clinical programs of MAYO, Mayo Clinic Platform, MAYO’s Affiliates, including MAYO’s reference laboratory and Mayo Collaborative Services, LLC, and the Mayo Clinic Care Network. SORRENTO agrees to comply with the provisions of the Bayh-Dole Act, including promptly providing to MAYO with information requested to enable MAYO to meet its compliance requirements and substantially manufacturing Licensed Product in the U.S.

2.03NO OTHER RIGHTS GRANTED. This Agreement does not grant any right, title or interest outside the Field or Territory or any right, title or interest in or to any tangible or intangible property right of MAYO or its Affiliates, including but not limited to any patent rights, know-how or material or any improvements thereon, which is not expressly stated herein, including pursuant to Sections 2.01 (Grant) and 2.04(a) (Additional Rights, Sponsored Research). All such other rights, titles and interests are expressly reserved by MAYO and SORRENTO agrees that in no event will this Agreement (i) exhaust any MAYO patent rights, or (ii) be construed as a sale, an assignment or an implied license by MAYO or its Affiliates to SORRENTO of any tangible or intangible property rights.

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2.04 ADDITIONAL RIGHTS.

a)Sponsored Research. Notwithstanding anything to the contrary contained herein (including Section 2.03), the Parties agree that the licenses and rights under this Agreement shall cover all improvements to the Licensed IP and any other intellectual property (including patent rights, know-how, data, materials and any improvements thereon) developed in connection with or otherwise arising from any sponsored research funded by SORRENTO or any of its Affiliates, pursuant to any separate sponsored research agreement(s) as contemplated in Section 3.07 hereof.

b)Other Research. Subject to any third party rights and solely during the Royalty Term, MAYO shall make best efforts to make SORRENTO aware of any intellectual property that is targeted nanoparticle therapeutics and/or antibody drug conjugates that are developed without funding by SORRENTO and not by Mayo Investigators funded by SORRENTO, to allow SORRENTO a reasonable opportunity to negotiate a license to such intellectual property on commercially reasonable terms and, upon request by SORRENTO, MAYO shall (or shall cause its Affiliate(s), as applicable to) negotiate in good faith with SORRENTO to effect such license(s).

c)Other IP Rights. MAYO agrees not to assert against SORRENTO or its Affiliates any other intellectual property rights owned and controlled by MAYO as of the Effective Date based on SORRENTO’s or its Affiliates’ use of the Materials solely in the form provided by MAYO to SORRENTO listed in Exhibit A as of the Effective Date, if and to the extent such Materials infringes or misappropriates such other intellectual property rights of MAYO. For the avoidance of doubt, such forbearance is not transferrable without Mayo’s prior written consent.

2.05SUBLICENSES. Any sublicense by SORRENTO, other than to an Affiliate shall be to a Sublicensee that agrees in writing to be bound by substantially similar terms and conditions as SORRENTO herein, as applicable (for clarity, excluding financial terms and conditions), or such sublicense shall be null and void. Sublicenses granted hereunder shall not be assignable without the prior written approval of MAYO consistent with the terms and conditions of Section 11.11 hereof; provided, that any such assignation assignment in violation of such terms and conditions shall be null and void. SORRENTO will provide MAYO with an un-redacted copy of each sublicense agreement (including those through multiple tiers) promptly after execution, which shall be deemed and treated as the Confidential Information of SORRENTO. As between the Parties, SORRENTO shall be responsible for the performance of all Affiliates and Sublicensees as if such performance were carried out by SORRENTO itself, including the payment of any royalties or other payments provided for and due to MAYO hereunder triggered by such Sublicense, regardless of whether the terms of any sublicense require that Sublicensee pay such amounts (such as in a fully paid-up license) to SORRENTO or that such amounts be paid by the Sublicensee directly to MAYO. Each sublicense agreement with a Sublicensee shall name MAYO as a third party beneficiary and, unless MAYO has provided written consent, all rights of Sublicensees shall terminate when SORRENTO’s rights terminate. For the avoidance of doubt, the granting by SORRENTO of any fully-paid up or royalty-free sublicenses will not alleviate the obligation of SORRENTO to pay the Earned Royalty based on Net Sales of Royalty-Bearing Products made by such applicable Sublicensee.

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Article 3.00 – Up-Front, Milestone and Royalties Payments; Registration

3.01UP-FRONT.

a)In consideration for the rights granted herein, SORRENTO shall, within six (6) trading days of the Effective Date, pay to MAYO NINE MILLION THREE HUNDRED THOUSAND DOLLARS (US $9,300,000) (the “Upfront Payment Amount”), which payment shall be comprised (A) solely of shares of restricted SORRENTO common stock (the “Shares”) (with the number of Shares calculated in accordance with the next sentence), or (B) any combination of cash paid in immediately available funds via wire transfer to an account designated by MAYO in writing and Shares (with the number of Shares calculated in accordance with the next sentence), in any case as determined by SORRENTO in its sole and absolute discretion; provided that the portion of the Upfront Payment Amount comprised of cash shall not exceed 25% of the Upfront Payment Amount. The Shares shall be issued to MAYO in the name of Mayo Clinic and the number of Shares issuable shall be equal to the quotient obtained by dividing (i) the dollar amount of the Upfront Payment Amount to be paid in Shares by (ii) the weighted average closing price of SORRENTO’s common stock, as reported on The Nasdaq Stock Market LLC, for the 11 consecutive trading days beginning on the 5th trading day prior to the date of this Agreement; provided that in no event shall the value in clause (ii) be less than FOUR DOLLARS AND NINETY SIX CENTS (US $4.96) nor greater than SEVEN DOLLARS AND FORTY FOUR CENTS (US $7.44). In addition, in no event shall the number of Shares equal more than FIFTY ONE MILLION EIGHT HUNDRED AND ONE THOUNSAND ONE HUNDRED AND SIXTY TWO (51,801,162) shares of SORRENTO’s common stock. As of the Effective Date of this Agreement, SORRENTO has TWO HUNDRED AND FIFTY NINE MILLION ONE HUNDRED AND THIRTY FIVE THOUSAND THREE HUNDRED AND EIGHTY (259,135,380) shares of common stock outstanding. [...***...]. [...***...].

All Shares issued to MAYO shall be duly authorized, validly issued, fully paid, non-assessable and unencumbered, and any associated agreements MAYO shall be required to enter into related to such issuance shall only contain reasonable and customary terms and conditions.

b)SORRENTO will also reimburse MAYO all reasonable, documented unreimbursed preclinical and clinical research expenses at MAYO associated with the Licensed IP arising before the Effective Date of this Agreement in an amount of no more than THREE MILLION FOUR HUNDRED THOUSAND DOLLARS (US $3,400,000), within 30 days of receipt of invoice and supporting documentation for entering into this Agreement.

c)SORRENTO will reimburse MAYO all documented and unreimbursed expenses related to the development and manufacturing of the Materials arising before the Effective Date of this Agreement in an amount of TWO MILLION TWENTY TWO THOUSAND SEVEN HUNDRED SEVENTY EIGHT DOLLARS AND THIRTY FIVE CENTS (US $2,022,778.35), within 30 days of receipt of invoice and supporting documentation for entering into this Agreement.

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3.02MILESTONE FEES. SORRENTO will pay MAYO the following nonrefundable and noncreditable milestone fees for each Licensed Product developed by SORRENTO within sixty (60) days following achievement of the following events during the Term of this Agreement:


	Event	Milestone Payment
1	Initiation of the 1^st [...***...] for each Licensed Product	US $[...***...]
2	Initiation of the 1^st [...***...] for each Licensed Product	US $[...***...]
3	Market approval by [...***...] for each Licensed Product	US $[...***...]
4	Market approval by [...***...] for each Licensed Product	US $[...***...]
5	Upon achieving a cumulative gross sales of $[...***...] of a Licensed Product (payable for each such Licensed Product to reach such milestone)	US $[...***...]
6	Upon achieving a cumulative gross sales of $[...***...] of a Licensed Product (payable for each such Licensed Product to reach such milestone)	US $[...***...]
7	Upon achieving a cumulative gross sales of $[...***...] of a Licensed Product (payable for each such Licensed Product to reach such milestone)	US $[...***...]
8	Upon achieving a cumulative gross sales of $[...***...] of a Licensed Product (payable for each such Licensed Product to reach such milestone)	US $[...***...]

3.03EARNED ROYALTIES. On a Royalty-Bearing Product-by-Royalty-Bearing Product and country-by-country basis, during the Royalty Term, SORRENTO will make nonrefundable and noncreditable earned royalty payments (“Earned Royalties”) to MAYO of:

a)[...***...] percent ([...***...]%) of Net Sales of Royalty-Bearing Products that[...***...]; or

b)[...***...] percent ([...***...]%) of Net Sales of Royalty-Bearing Products that [...***...].

The Earned Royalties are payable as described in Section 4.01 (Reports and Payment). No Earned Royalties are due MAYO on transfers to MAYO or MAYO Affiliates. For the avoidance of doubt, only one Earned Royalty shall be payable for any given Royalty-Bearing Product (it being understood that no Royalty-Bearing Product will be subject to both subsection (i) and subsection (ii) above, but if a Royalty-Bearing Product is subject to both subsection (i) and subsection (ii), the higher of the two Earned Royalties shall be paid).

3.04ROYALTY STACKING. If SORRENTO is a party to a license agreement with any third party under which SORRENTO obtains a license for technology reasonable required for the manufacture, use, sale, import, export, or other Exploitation of a Royalty-Bearing Product then SORRENTO may reduce the Earned Royalties due to MAYO on such Royalty-Bearing Product

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(on a product-by-product basis) by [...***...] percent ([...***...]%) of the royalties that are payable to such third party; provided, however, that in no event will the Earned Royalties be reduced to less than [...***...] percent ([...***...]%) of the Earned Royalties that would otherwise be payable under Section 3.03 (Earned Royalties). For the avoidance of doubt, the Earned Royalties otherwise due may not be reduced to more than [...***...] percent ([...***...]%) regardless of the number of additional licenses to which SORRENTO is a party. SORRENTO agrees to notify MAYO immediately if SORRENTO enters into any additional license(s) with a third party or parties that would affect the Earned Royalty amount received by MAYO.

3.05RESERVED

3.06SUBLICENSE INCOME ROYALTY. SORRENTO will make nonrefundable and noncreditable payments to MAYO of Sublicense Income as follows:

a)If the Licensed IP or Licensed Product is sublicensed by SORRENTO prior to the successful Completion of [...***...], SORRENTO shall pay MAYO [...***...] percent ([...***...]%) of all Sublicense Income for such Licensed IP or Licensed Product obtained by SORRENTO from the applicable Sublicensee.

b)If the Licensed IP or Licensed Product is sublicensed by SORRENTO after successful Completion of [...***...] and prior to the successful Completion of [...***...], SORRENTO shall pay MAYO [...***...] percent ([...***...]%) of all Sublicense Income for such Licensed IP or Licensed Product obtained by SORRENTO from the applicable Sublicensee.

c)If the Licensed IP or Licensed Product is sublicensed by SORRENTO after the successful Completion of [...***...], SORRENTO shall pay MAYO [...***...] percent ([...***...]%) of all Sublicense Income for such Licensed IP or Licensed Product obtained by SORRENTO from the applicable Sublicensee.

The Sublicense Income is payable as described in Section 4.01 (Reports and Payment).

3.07Sponsored Research Funding. Promptly following execution of this Agreement the Parties agree to negotiate in good faith and enter into a sponsored research agreement, which agreement will provide that, during the [...***...] after the Effective Date, SORRENTO shall [...***...] from the Effective Date, in research funding for work to be done at MAYO to develop the Licensed Product(s), subject to mutually agreed upon work plans and budgets, and subject to MAYO policies and the approval of MAYO’s Institutional Review Board and Conflict of Interest Committee. Such sponsored research activities may include basic research projects, as well as toxicology, GMP manufacturing or additional Phase I or Phase II clinical trials of the Licensed IP. The Parties shall mutually agree upon any additional research funding for work to be done at MAYO in subsequent years. Any sponsored research shall be outlined and agreed upon in a separate research agreement between MAYO and SORRENTO.

3.08PRIORITY REVIEW. In the event that SORRENTO receives an FDA priority review voucher or similar transferrable asset based on a submission relating to a Licensed Product and elects to sell or otherwise transfer such asset to a third party, SORRENTO will share [...***...] ([...***...]%) of any consideration in any form received by SORRENTO in exchange. Such consideration shall payable as described in Section 4.01 (Reports and Payment).

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3.09PRICE. Subject to SORRENTO’s or its designee’s manufacturing and supply capacity, availability of the given Licensed Product and any obligations or commitments to third parties, the Parties intend that MAYO may, at its sole option, submit orders to purchase the Licensed Product for use within MAYO’s and its Affiliates’ clinical programs and non-commercial educational and research programs in such quantity that SORRENTO can reasonably accommodate at [...***...].

3.10TAXES. SORRENTO is responsible for all taxes, duties, import duties, assessments and other governmental charges, however designated, which are now or hereafter imposed by any authority on SORRENTO: (a) by reason of the performance by MAYO of its obligations under this Agreement, or the payment of any amounts by SORRENTO to MAYO under this Agreement; (b) based on the rights granted herein; or (c) related to use, sale or importation of the Licensed Product. In the event there is any withholding tax that SORRENTO has to withhold during the Term of this Agreement, SORRENTO will inform MAYO in advance. If necessary, SORRENTO will obtain, or assist MAYO in obtaining, any tax reduction (including avoidance of double taxation), tax refund or tax exemption available to MAYO by treaty or otherwise.

3.11U.S. CURRENCY. All payments to MAYO under this Agreement will be made by draft drawn on a U.S. bank, and payable in U.S. dollars. In the event that conversion from foreign currency is required in calculating a payment under this Agreement, the exchange rate used shall be the Interbank rate quoted by US Bank at the end of the last business day of the quarter in which the payment accrued.

3.12OVERDUE PAYMENTS. If overdue, the payments due under this Agreement shall bear interest until paid at a per annum rate of [...***...] percent ([...***...]%) above the prime rate in effect at US Bank on the due date. MAYO shall be entitled to recover, in addition to all other remedies, reasonable attorneys’ fees and costs related to the administration or enforcement of this Agreement, including collection of payments, following SORRENTO’s such failure to pay. The acceptance of any payment, including such interest, shall not foreclose MAYO from exercising any other right or seeking any other remedy that it may have as a consequence of the failure of SORRENTO to make any payment when due.

3.13Resale Registration Rights.

a)Within 30 days following the issuance of the Shares, SORRENTO shall (i) file with the Securities and Exchange Commission (the “SEC”), or (ii) have filed with the SEC, a resale registration statement (together with any New Resale Registration Statement (as defined below), the “Resale Registration Statement”) pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to which all of the Shares (the “Registrable Securities”) shall be included (on the initial filing or by supplement or amendment thereto) to enable the public resale on a delayed or continuous basis of the Registrable Securities by MAYO. SORRENTO shall file the Resale Registration Statement on such form as SORRENTO may then utilize under the rules of the SEC and use its commercially reasonable efforts to have the Resale Registration Statement declared effective under the Securities Act as soon as practicable, but in no event more than the earlier of: (A) 90 days following the issuance of the Shares, and (B) four business days after the date SORRENTO receives written notification from the SEC that the Resale Registration Statement will not be reviewed. SORRENTO agrees to use

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its commercially reasonable efforts to maintain the effectiveness of the Resale Registration Statement, including by filing any necessary post-effective amendments and prospectus supplements, or, alternatively, by filing one or more new registration statements (each, a “New Resale Registration Statement”) relating to the Registrable Securities as required by Rule 415 under the Securities Act, continuously until the date that is the earlier of (i) three (3) years following the date of effectiveness of the Resale Registration Statement, (ii) the date on which MAYO no longer holds any Registrable Securities covered by such Resale Registration Statement, or (iii) the date that the Registrable Securities can be sold under Rule 144 without restriction.

3.14Provisions Relating to Registration.

a)Notwithstanding any other provisions of this Agreement to the contrary, SORRENTO shall cause (i) the Resale Registration Statement (as of the effective date of the Resale Registration Statement), any amendment thereof (as of the effective date thereof) or supplement thereto (as of its date), (A) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the SEC, and (B) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and (ii) any related prospectus, preliminary prospectus and any amendment thereof or supplement thereto, as of its date, (1) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the SEC, and (2) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, SORRENTO shall have no such obligations or liabilities with respect to any written information pertaining to MAYO and furnished to SORRENTO by or on behalf of MAYO specifically for inclusion therein.

b)SORRENTO shall notify MAYO: (i) when the Resale Registration Statement, or any amendment thereto has been filed with the SEC and when the Resale Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the SEC for amendments or supplements to the Resale Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the SEC of any stop order suspending the effectiveness of the Resale Registration Statement or the initiation of any proceedings for that purpose and of any other action, event or failure to act that would cause the Resale Registration Statement not to remain effective; and (iv) of the receipt by SORRENTO of any notification with respect to the suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose.

c)As promptly as practicable after becoming aware of such event, SORRENTO shall notify MAYO of the happening of any event (a “Suspension Event”), of which SORRENTO has knowledge, as a result of which the prospectus included in the Resale Registration Statement as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and use its best efforts promptly to prepare a supplement or amendment to the Resale Registration Statement to correct such untrue statement or omission, and deliver such number of copies of such supplement or amendment to MAYO as MAYO may reasonably

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request; provided, however, that, for not more than 30 consecutive trading days (or a total of not more than 90 trading days in any 12 month period), SORRENTO may delay, to the extent permitted by and in a manner not in violation of applicable securities laws, the disclosure of material non-public information concerning SORRENTO (as well as prospectus or Resale Registration Statement updating), the disclosure of which at the time is not, in the good faith opinion of SORRENTO, in the best interests of SORRENTO; provided, further, that, if the Resale Registration Statement was not filed on Form S-3, such number of days shall not include the 15 calendar days following the filing of any Current Report on Form 8-K, Quarterly Report on Form 10-Q or Annual Report on Form 10-K, or other comparable form, for purposes of filing a post-effective amendment to the Resale Registration Statement.

d)Upon a Suspension Event, SORRENTO shall give written notice (a “Suspension Notice”) to MAYO to suspend sales of the affected Registrable Securities, and such notice shall state that such suspension shall continue only for so long as the Suspension Event or its effect is continuing and SORRENTO is pursuing with reasonable diligence the completion of the matter giving rise to the Suspension Event or otherwise taking all reasonable steps to terminate suspension of the effectiveness or use of the Resale Registration Statement provided, however, that the Suspension shall not be for more than 30 consecutive trading days (or a total of not more than 90 trading days in any 12 month period). In no event shall SORRENTO, without the prior written consent of MAYO, disclose to MAYO any of the facts or circumstances giving rise to the Suspension Event. MAYO shall not effect any sales of the Registrable Securities pursuant to such Resale Registration Statement (or such filings), at any time after it has received a Suspension Notice and prior to receipt of an End of Suspension Notice. MAYO may resume effecting sales of the Registrable Securities under the Resale Registration Statement (or such filings), following further notice to such effect (an “End of Suspension Notice”) from SORRENTO. This End of Suspension Notice shall be given by SORRENTO to MAYO in the manner described above promptly following the conclusion of any Suspension Event and its effect. For the avoidance of doubt, a Suspension Notice shall not affect or otherwise limit sales of affected Registrable Securities under Rule 144 or otherwise outside of the Resale Registration Statement.

e)Notwithstanding any provision herein to the contrary, if SORRENTO gives a Suspension Notice pursuant to this Section 3.14with respect to the Resale Registration Statement, SORRENTO shall extend the period during which the Resale Registration Statement shall be maintained effective under this Agreement by the number of days during the period from the date of the giving of the Suspension Notice to and including the date when MAYO shall have received the End of Suspension Notice and copies of the supplemented or amended prospectus necessary to resume sales; provided however, such period of time shall not be extended beyond the date that the Registrable Securities can be sold under Rule 144 without restriction.

f)SORRENTO shall bear all Registration Expenses incurred in connection with the registration of the Registrable Securities pursuant to this Agreement. “Registration Expenses” shall mean any and all expenses incident to the performance of or compliance with this Agreement, including without limitation: (i) all registration and filing fees; (ii) all fees and expenses associated with a required listing of the Registrable Securities on any securities exchange; (iii) fees and expenses with respect to filings required to be made with an exchange or any securities industry self-regulatory body; (iv) fees and expenses of compliance with securities or “blue sky” laws (including reasonable fees and disbursements of counsel for the underwriters

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or holders of securities in connection with blue sky qualifications of the securities and determination of their eligibility for investment under the laws of such jurisdictions); (v) printing, messenger, telephone and delivery expenses of SORRENTO; (vi) fees and disbursements of counsel for SORRENTO and customary fees and expenses for independent certified public accountants retained by SORRENTO (including the expenses of any comfort letters, or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters, if such comfort letter or comfort letters is required by the managing underwriter); (vii) securities acts liability insurance, if SORRENTO so desires; (viii) all internal expenses of SORRENTO (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties); (ix) the expense of any annual audit; and (x) the fees and expenses of any Person, including special experts, retained by SORRENTO; provided, however that “Registration Expenses” shall not include underwriting fees, discounts or commissions attributable to the sale of the Registrable Securities or any legal fees and expenses of counsel to MAYO.

g)Notwithstanding anything to the contrary contained in this Agreement, SORRENTO shall not be required to include Registrable Securities in the Resale Registration Statement unless MAYO, following reasonable advance written request by SORRENTO, furnishes to SORRENTO, at least 10 business days prior to the scheduled filing date of the Resale Registration Statement, an executed stockholder questionnaire in the form attached hereto as Exhibit C.

3.15Indemnification with Respect to Registration.

a)In the event of the offer and sale of the Registrable Securities held by MAYO under the Securities Act, SORRENTO agrees to indemnify and hold harmless MAYO and its directors, officers, employees, affiliates and agents and each Person who controls MAYO within the meaning of the Securities Act or the Exchange Act of 1934, as amended (the “Exchange Act”), (collectively, the “MAYO Indemnified Parties”) from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof to which each MAYO Indemnified Party may become subject under the Securities Act or the Exchange Act, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Resale Registration Statement or in any amendment thereof, in each case at the time such became effective under the Securities Act, or in the preliminary prospectus or other information that is deemed, under Rule 159 promulgated under the Securities Act to have been conveyed to purchasers of securities at the time of sale of such securities (“Disclosure Package”), in the prospectus or in any amendment thereof or supplement thereto, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Disclosure Package or any prospectus, in the light of the circumstances under which they were made) not misleading, and shall reimburse, as incurred, the MAYO Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that SORRENTO shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or omission made in the Resale Registration Statement, the Disclosure Package, any prospectus or in any amendment thereof or supplement thereto in reliance upon and in conformity with written information pertaining to MAYO and furnished to SORRENTO by or on behalf of such MAYO

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Indemnified Party specifically for inclusion therein; provided further, however, that SORRENTO shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in the Disclosure Package, where (A) such statement or omission had been eliminated or remedied in any subsequently filed amended prospectus or prospectus supplement (the Disclosure Package, together with such updated documents, the “Updated Disclosure Package”), the filing of which MAYO had been notified in accordance with the terms of this Agreement, (B) such Updated Disclosure Package was available at the time MAYO sold Registrable Securities under the Resale Registration Statement, (C) such Updated Disclosure Package was not furnished by MAYO to the Person asserting the loss, liability, claim, damage or liability, or an underwriter involved in the distribution of such Registrable Securities, at or prior to the time such furnishing is required by the Securities Act, and (D) the Updated Disclosure Package would have cured the defect giving rise to such loss, liability, claim, damage or action; and provided further, however, that this indemnity agreement will be in addition to any liability that SORRENTO may otherwise have to such MAYO Indemnified Party. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any MAYO Indemnified Parties and shall survive the transfer of the Registrable Securities by MAYO.

b)As a condition to including any Registrable Securities to be offered by MAYO in any registration statement filed pursuant to this Agreement, MAYO agrees to indemnify and hold harmless SORRENTO, each of its directors, each of its officers who signs the Resale Registration Statement, as well as any officers, employees, affiliates and agents of SORRENTO, and each Person, if any, who controls SORRENTO within the meaning of the Securities Act or the Exchange Act (a “SORRENTO Indemnified Party”) from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which a SORRENTO Indemnified Party may become subject under the Securities Act or the Exchange Act, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Resale Registration Statement or in any amendment thereof, in each case at the time such became effective under the Securities Act, or in any Disclosure Package, prospectus or in any amendment thereof or supplement thereto, or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of the Disclosure Package or any prospectus, in the light of the circumstances under which they were made) not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to MAYO and furnished to SORRENTO by or on behalf of MAYO specifically for inclusion therein; and, subject to the limitation immediately preceding this clause, shall reimburse, as incurred, the SORRENTO Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of MAYO, or any such director, officer, employees, affiliates and agents and shall survive the transfer of such Registrable Securities by MAYO, and MAYO shall reimburse SORRENTO, and each such director, officer, employees, affiliates and agents for any legal or other expenses reasonably incurred by them in connection with investigating, defending, or settling and such loss, claim, damage, liability, action, or proceeding; provided, however, that the indemnity amount contained in this Section 3.15(b) shall in no event exceed the gross proceeds from the offering received by MAYO. Such indemnity shall remain in full

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force and effect, regardless of any investigation made by or on behalf of SORRENTO or any such director, officer, employees, affiliates and agents and shall survive the transfer by MAYO of such Registrable Securities.

c)Promptly after receipt by a MAYO Indemnified Party or a Company Indemnified Party (each, an “Indemnified Party”) of notice of the commencement of any action or proceeding (including a governmental investigation), such Indemnified Party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 3.15, notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve the indemnifying party from liability under Sections 3.15 (a) or 3.15 (b) unless and to the extent it did not otherwise learn of such action and the indemnifying party has been materially prejudiced by such failure. In case any such action is brought against any Indemnified Party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such Indemnified Party (who shall not, except with the consent of the Indemnified Party, be counsel to the indemnifying party), and after notice from the indemnifying party to such Indemnified Party of its election so to assume the defense thereof the indemnifying party will not be liable to such Indemnified Party under this Section 3.15 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such Indemnified Party in connection with the defense thereof; provided, however, if such Indemnified Party shall have been advised by counsel that there are one or more defenses available to it that are in conflict with those available to the indemnifying party (in which case the indemnifying party shall not have the right to direct the defense of such action on behalf of the Indemnified Party), the reasonable fees and expenses of such Indemnified Party’s counsel shall be borne by the indemnifying party. In no event shall the indemnifying party be liable for the fees and expenses of more than one counsel (together with appropriate local counsel) at any time for any Indemnified Party in connection with any one action or separate but substantially similar or related actions arising in the same jurisdiction out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the Indemnified Party (not to be unreasonably withheld or delayed), effect any settlement of any pending or threatened action in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party unless such settlement (i) includes an unconditional release of such Indemnified Party from all liability on any claims that are the subject matter of such action, and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any Indemnified Party. If the indemnification provided for in this Section 3.15 is unavailable or insufficient to hold harmless an Indemnified Party under Sections 3.15(a) or 3.15(b), then each indemnifying party shall contribute to the amount paid or payable by such Indemnified Party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in Sections 3.15(a) or 3.15(b) in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and the Indemnified Party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by SORRENTO on the one hand or MAYO or MAYO Indemnified Party, as the case may be, on the other, and the parties’ relative intent, knowledge,

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access to information and opportunity to correct or prevent such statement or omission. The amount paid by an Indemnified Party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this Section 3.15(c) shall be deemed to include any legal or other expenses reasonably incurred by such Indemnified Party in connection with investigating or defending any action or claim that is the subject of this Section 3.15(c). The parties agree that it would not be just and equitable if contributions were determined by pro rata allocation (even if MAYO was treated as one entity for such purpose) or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding any other provision of this Section 3.15(c), MAYO shall not be required to contribute any amount in excess of the amount by which the net proceeds received by MAYO from the sale of the Registrable Securities pursuant to the Resale Registration Statement exceeds the amount of damages that MAYO has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

d)The agreements contained in this Section 3.15 shall survive the sale of the Registrable Securities pursuant to the Resale Registration Statement, and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any Indemnified Party.

Article 4.00 – Accounting and Reports

4.01REPORTS AND PAYMENT. SORRENTO will deliver to MAYO on or before the following dates: 1 February, 1 May, 1 August and 1 November, a written report setting forth a full accounting showing how any amounts due to MAYO for the preceding calendar quarter have been calculated as provided in this Agreement, including an accounting of total Net Sales with a reporting of any applicable foreign exchange rates, deductions, allowances, and charges and any payments due from Sublicensees. Each report will include product names, part numbers and quantity sold for each country in which the Licensed Product was sold. Furthermore, the report will include detailed information about Licensed Products sold to MAYO or MAYO Affiliates. If no Licensed Product transfers have occurred and no other amounts are due to MAYO, SORRENTO will submit a report so stating. Each such report will be accompanied by the payment of all amounts due for such reporting period. The first report and payment due each calendar year shall also be accompanied by a reporting of the prior year’s best net price for each Licensed Product, per Section 3.09.

4.02ACCOUNTING. SORRENTO will, and shall require its Affiliates and Sublicensees to keep, throughout the Term, keep complete, continuous, true and accurate books of accounts and records sufficient to support and verify the calculation of Net Sales, all royalties and any other amount believed due and payable to MAYO under this Agreement. Such books and records may be audited no more than once in any calendar year by an independent third party auditor reasonably acceptable to SORRENTO and MAYO solely for audit and verification of royalty statements and the other amounts owed to MAYO hereunder. The MAYO representative will treat as confidential all relevant matters and will be a person or firm reasonably acceptable to SORRENTO. In the event such audit reveals an underpayment by SORRENTO, SORRENTO will within thirty (30) days pay the royalty due in excess of the royalty actually paid. In the event the audit reveals an underpayment by SORRENTO of more than [...***...] percent

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([...***...]%) of the amount due, SORRENTO will pay interest on the royalty due in excess of the royalty actually paid at the highest rate then permitted by law. In either event, SORRENTO will pay all of MAYO’s costs in conducting the audit.

Article 5.00 – Diligence

5.01DEVELOPMENT PLAN. SORRENTO will make Commercially Reasonable Efforts to bring Licensed Products to market in the Field in the Territory. Within three months of the Effective Date and annually thereafter, SORRENTO will provide to MAYO a development plan, and the Parties shall discuss in good faith to mutually agree upon the Licensed Products being brought forth as well as target milestones that describes how SORRENTO intends to bring Licensed Products to market, which shall be attached hereto as Exhibit D, Development Plan, incorporated herein by reference.

5.02DILIGENCE REPORTS. SORRENTO will provide MAYO with annual reports within thirty (30) days of each anniversary of the Effective Date describing in detail: (a) as of that reporting period, all development and marketing activities for each Licensed Product and the names of all Sublicensees, including which of the Sublicensees are Affiliates; and (b) an updated development plan for the next annual period. MAYO shall have the right, no more than once annually, to reasonably audit SORRENTO’s and Sublicensees’ records relating to development of Licensed Products.

Article 6.00 – Intellectual Property Management

6.01CONTROL. SORRENTO will have the first right to prepare, file, prosecute, abandon, or otherwise handle the Patent Rights, using counsel of SORRENTO’s selection, with prior advice and comment from MAYO. SORRENTO shall pay all reasonable, documented unreimbursed costs and expenses associated with the filing, prosecution and maintenance of the Patent Rights, whether arising before or during the Term. [...***...]. In the event that SORRENTO decides not to (i) prosecute or maintain an application or patent within the Patent Rights; or (ii) pursue claims suggested by MAYO, SORRENTO shall inform MAYO of such decision at least thirty (30) days prior to the relevant deadline. Should MAYO then choose to (a) continue the prosecution or maintenance of an application or patent abandoned by SORRENTO; or (b) file a patent application pursuing claims not pursued by SORRENTO, MAYO shall pay the cost of such activity, and any license to the SORRENTO for such patent rights shall terminate. MAYO shall have sole control over the protection, defense, enforcement, maintenance, abandonment and other handling of the Know-How and Materials. MAYO will have no liability to SORRENTO for any act or omission in the preparation, filing, prosecution, maintenance, abandonment, or other handling of the Patent Rights and Know-How and Materials.

6.02ENFORCEMENT. The Parties shall promptly notify each other of any suspected infringement of any Patent Rights.

a)During the Term, SORRENTO shall, at its expense, have the first right to enforce any Patent Rights against such infringer. SORRENTO agrees to defend MAYO against any counterclaim brought against it in such action. MAYO shall reasonably cooperate with SORRENTO in such effort, at SORRENTO‘s expense, including being joined as a party to such

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action, if deemed by a court with competent jurisdiction as a necessary party. SORRENTO shall reimburse MAYO for any reasonable costs incurred, including reasonable attorneys’ fees, as part of any action brought by SORRENTO.

b)SORRENTO shall have the right to enter into any settlement agreement, voluntary dismissal, consent judgment or other voluntary final disposition in any action regarding the Patent Rights, provided that SORRENTO will give MAYO a reasonable opportunity to review and comment on any such proposed settlement agreement, voluntary dismissal, consent judgment, or other voluntary final dismissal and SORRENTO will not enter into such proposed settlement agreement, voluntary dismissal, consent judgment, or other voluntary final dismissal if MAYO reasonably objects to the same (and in which case the Parties will promptly work together to identify a mutually acceptable resolution to such action). Any amounts received for punitive or exemplary damages shall be shared equally between MAYO and SORRENTO and any other amounts received, including compensatory damages or damages based on a loss of revenues which exceed the out-of-pocket costs and expenses incurred by SORRENTO, shall be deemed to be Net Sales of Royalty-Bearing Products in the fiscal quarter received.

c) If SORRENTO fails, within one hundred twenty (120) days after receiving notice of a potential infringement, to institute an action against such infringer or notifies MAYO that it does not plan to institute such action, then MAYO shall have the right to do so at its own expense. SORRENTO shall cooperate with MAYO in such effort including being joined as a party to such action if necessary. MAYO shall be entitled to retain all damages or costs awarded in such action. Should either MAYO or SORRENTO be a party to a suit under the provisions of this Article and thereafter elect to abandon such suit, the abandoning party shall give timely notice to the other party who may, at its discretion, continue prosecution of such suit.

6.03PATENT TERM EXTENSION. SORRENTO shall consult with MAYO in selecting the patent covering each Licensed Product for patent term extension for or supplementary protection certificate in accordance with the Applicable Laws of any country. Each Party agrees to execute any documents and to take any additional actions as the other Party may reasonably request in connection therewith.

6.04PATENT MARKING. To the extent commercially feasible, SORRENTO will mark all Licensed Products that are manufactured or sold under this Agreement with the number of each issued patent within the Patent Rights that cover such Licensed Product(s). Any such marking will be in conformance with the patent laws and other laws of the country of manufacture or sale.

6.05DEFENSE. MAYO will have the first right, but not the obligation, to take any measures deemed appropriate by MAYO, regarding (a) challenges to the Patent Rights (including interferences, inter partes review, post grant review, cover business method, ex parte examination, or derivation proceedings in the U.S. Patent and Trademark Office and oppositions in foreign jurisdictions) and (b) defense of the Patent Rights (including declaratory judgment actions). SORRENTO shall have the right to comment and participate in any such challenge or action at its request and expense, and will reasonably cooperate in any such measures if requested to do so by MAYO. Should MAYO choose not to defend that Patent Rights against any such challenges or actions then SORRENTO may do so at its own expense [...***...].

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6.06THIRD PARTY LITIGATION. In the event a third party institutes a suit against SORRENTO for infringement of intellectual property involving a Licensed Product, SORRENTO will promptly inform MAYO and keep MAYO regularly informed of the proceedings. SORRENTO agrees to indemnify, defend and hold harmless MAYO for any claims, demands or law suits related thereto in accordance with Article 9.

Article 7.00 – Use of Name

7.01USE OF NAME AND LOGO. Except to the extent required by Applicable Law (including reporting obligations with respect to public filings), neither Party will use for publicity, promotion or otherwise, any logo, name, trade name, service mark or trademark of the other Party or its Affiliates, or any simulation, abbreviation or adaptation of the same, or the name of any employee or agent of the other Party, without that Party’s prior, written, express consent. A Party may withhold such consent in that Party’s absolute discretion. MAYO’s marks include, but are not limited to the terms “MAYO®,” “MAYO Clinic®” and the triple shield MAYO logo. With regard to the use of MAYO’s name, all requests for approval pursuant to this Section must be submitted to the Mayo Clinic Public Affairs Business Relations Group, at the e-mail address [...***...] at least ten (10) business days prior to the date on which a response is needed (which time period may be waived in MAYO’s sole discretion).

Article 8.00 – Confidentiality

8.01TREATMENT OF CONFIDENTIAL INFORMATION. Except as provided for in Section 8.02 (Right to Disclose), neither Party will disclose, use or otherwise make available the other’s Confidential Information during the Term and for three (3) years thereafter and will use at least the same degree of care it employs to protect its own confidential information.

8.02RIGHT TO USE AND DISCLOSE.

(a)To the extent it is reasonably necessary or appropriate to fulfill its obligations or exercise its rights under this Agreement, SORRENTO may use and disclose Confidential Information of MAYO to its Sublicensees, consultants, and outside contractors on the condition that each such entity or person agrees to obligations of confidentiality and non-use at least as stringent as those herein.

(a)To the extent it is reasonably necessary or appropriate to fulfill its obligations or exercise its rights under this Agreement, MAYO may disclose Confidential Information of SORRENTO to its consultants and outside contractors on the condition that each such entity agrees to obligations of confidentiality and non-use at least as stringent as those herein.

(b)If a Party is required by law, regulation or court order to disclose any of the Confidential Information, it will have the right to do so, provided it: (i) promptly notifies the disclosing Party; and (ii) reasonably assists the disclosing Party to obtain a protective order or other remedy of disclosing Party’s election and at disclosing Party’s expense, and only disclose the minimum amount necessary to satisfy such obligation.

8.03CONFIDENTIALITY OF AGREEMENTS. Except as otherwise required by law, the specific terms and conditions of this Agreement shall be Confidential Information but the

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existence and Field of this Agreement will not be Confidential Information and the Parties may state that SORRENTO is licensed under the Licensed IP.

Article 9.00 – Warranties, Representations, Disclaimers and Indemnification

9.01REPRESENTATIONS AND WARRANTIES.

a)By All Parties. Each Party represents, warrants and covenants to the other that:

(i)it is duly organized and validly existing under the laws of its state of formation and has full authority to enter into this Agreement;

(ii)the execution and performance of this Agreement does not conflict with any other agreement, oral or written, to which it is a Party;

(iii)it will perform its obligations under this Agreement in compliance with all Applicable Laws; and

(iv)this Agreement is its legal, valid and binding obligation, enforceable against such Party in accordance with the terms and conditions hereof, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally or by the principles governing the availability of equitable remedies.

b)By SORRENTO. SORRENTO warrants and represents to MAYO that:

(i)it is experienced in the development, production, quality control, service, manufacture, marketing and sales of products similar to the subject matter of the Licensed IP and it will commit itself to a diligent program of developing and marketing the Licensed Products in accordance with each years development plan;

(ii)it has independently evaluated the Licensed IP and their applicability or utility in SORRENTO’s activities, and is entering into this Agreement on the basis of its own evaluation and not in reliance of any representation by MAYO, and, except to the extent arising out of or related to a breach of this Agreement by MAYO or MAYO’s gross negligence or willful misconduct, assumes all risk and liability in connection with such determination;

(iii) it now maintains and will continue to maintain throughout the Term and beyond (to the extent required in Section 9.03) insurance coverage as set forth in Section 9.03 (Indemnification and Insurance); and

(iv) it shall comply and shall use Commercially Reasonable Efforts to require its Sublicensees to comply with all applicable international, national and state laws, ordinances and regulations in its performance under this Agreement.

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c)By MAYO. MAYO warrants and represents to SORRENTO that:

(i)[...***...];

(ii)[...***...];

(iii)[...***...];

(iv)[...***...];

(v)[...***...]; and

(vi)[...***...].

9.02DISCLAIMERS.

(a)EACH PARTY AGREES AND ACKNOWLEDGES THAT, EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY SPONSORED RESEARCH AGREEMENT ENTERED INTO BY THE PARTIES: (i) NEITHER PARTY MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, IMPLIED OR STATUTORY WITH RESPECT TO THE SUBJECT MATTER OF THIS AGREEMENT, AND EACH PARTY HEREBY EXPRESSLY DISCLAIMS ALL SUCH REPRESENTATIONS AND WARRANTIES, IMPLIED OR STATUTORY, AND FOR MAYO, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AGAINST NON-INFRINGEMENT OR THE LIKE, OR ARISING FROM COURSE OF PERFORMANCE, AND (ii) MAYO HAS NOT MADE AND DOES NOT MAKE ANY PROMISES, COVENANTS, GUARANTEES, REPRESENTATIONS OR WARRANTIES OF ANY NATURE, DIRECTLY OR INDIRECTLY, EXPRESS, STATUTORY OR IMPLIED, INCLUDING WITHOUT LIMITATION, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, SUITABILITY, DURABILITY, CONDITION, QUALITY OR ANY OTHER CHARACTERISTIC OF THE LICENSED IP OR CONFIDENTIAL INFORMATION.

(b)WITHOUT LIMITING SECTION 9.02 AND EXCEPT AS EXPRESSLY PROVIDED HEREIN: (i) THE LICENSED IP AND CONFIDENTIAL INFORMATION IS PROVIDED “AS IS,” “WITH ALL FAULTS” AND “WITH ALL DEFECTS,” (ii) EXCEPT FOR CLAIMS ARISING OUT OF OR RELATED TO A BREACH OF THIS AGREEMENT BY MAYO, OR MAYO’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, SORRENTO EXPRESSLY WAIVES ALL RIGHTS TO MAKE ANY CLAIM WHATSOEVER AGAINST MAYO FOR MISREPRESENTATION OR FOR BREACH OF PROMISE, GUARANTEE, OR IMPLIED REPRESENTATION OR WARRANTY OF ANY KIND, IN ALL CASES RELATING TO THE LICENSED IP AND THE CONFIDENTIAL INFORMATION PROVIDED BY MAYO TO SORRENTO HEREUNDER; (iii) MAYO EXPRESSLY DISCLAIMS ANY IMPLIED WARRANTIES ARISING FROM ANY COURSE OF DEALING, USAGE OR TRADE PRACTICE, WITH RESPECT TO: THE SCOPE, VALIDITY OR ENFORCEABILITY OF THE LICENSED IP; THAT ANY PATENT WILL ISSUE BASED UPON ANY PENDING PATENT APPLICATION; OR THAT THE USE, SALE, OFFER FOR SALE OR IMPORTATION OF THE LICENSED PRODUCTS WILL

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NOT INFRINGE OTHER INTELLECTUAL PROPERTY RIGHTS. NOTHING IN THIS AGREEMENT WILL BE CONSTRUED AS AN OBLIGATION FOR MAYO TO BRING, PROSECUTE OR DEFEND ACTIONS REGARDING THE LICENSED IP.

(c)EXCEPT FOR CLAIMS ARISING OUT OF OR RELATED TO A BREACH OF THIS AGREEMENT BY MAYO, OR MAYO’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, SORRENTO AGREES THAT MAYO AND ITS AFFILIATES WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY OR ARISING OUT OF ANY RIGHTS GRANTED OR PERFORMANCE MADE UNDER THIS AGREEMENT, WHETHER TO OR BY SORRENTO, SUBLICENSEE OR A THIRD PARTY. EXCEPT WITH RESPECT TO ANY BREACH OF ARTICLE 8, A PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR FOR MAYO’S WILLFUL BREACH OF SECTION 2.01, OR AS MAY BE PAYABLE PURSUANT TO THE APPLICABLE PARTY’S INDEMNIFICATION OBLIGATIONS UNDER THIS AGREEMENT, TO THE MAXIMUM EXTENT PERMITTED BY LAW AND NOTWITHSTANDING ANY PROVISION IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT WILL EITHER PARTY’S LIABILITY OF ANY KIND INCLUDE ANY SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE LOSSES OR DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT FOR MAYO’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, OR MAYO’S WILLFUL BREACH OF SECTION 2.01, MAYO’S TOTAL LIABILITY SHALL NOT EXCEED THE TOTAL AMOUNT OF ROYALTIES AND OTHER CONSIDERATION (OTHER THAN REIMBURSEMENTS) THAT HAVE ACTUALLY BEEN PAID TO MAYO BY SORRENTO UNDER THIS AGREEMENT WITHIN THE PRIOR TWELVE MONTHS AS OF THE DATE OF FILING AN ACTION AGAINST MAYO THAT RESULTS IN THE SETTLEMENT OR AWARD OF DAMAGES TO SORRENTO.

9.03INDEMNIFICATION AND INSURANCE.

a)SORRENTO will defend, indemnify and hold harmless MAYO, MAYO’s Affiliates and their respective trustees, officers, agents, independent contractors and employees (“MAYO Indemnitees”) from any and all judgments, costs, expenses, damages and liabilities (including reasonable attorneys’ fees, court costs and other reasonable expenses of litigation) (collectively, “Liabilities”) resulting from suits, claims, actions and demands, in each case brought by a third party (each, a “Third-Party Claim”), regardless of the legal theory asserted, arising out of or connected with: (i) the practice or exercise of any rights granted hereunder by or on behalf of SORRENTO or any Sublicensee; (ii) research, development, design, manufacture, distribution, use, sale, importation, exportation or other disposition of Licensed Products by or on behalf of SORRENTO or any Sublicensee; (iii) any material breach of any of SORRENTO’s obligations, representations, warranties or covenants under this Agreement; or (iv) act or omission of SORRENTO or any Sublicensee in the performance under this Agreement, including the negligence or willful misconduct of a SORRENTO Indemnitee under this Agreement. SORRENTO’s obligation to indemnify the MAYO Indemnitees pursuant to this Section 9.03(a) shall not apply to the extent that any such Liabilities are the result of a material breach by MAYO of its obligations, representations, warranties or covenants under this Agreement or MAYO’s gross negligence or willful misconduct.

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b)MAYO will defend, indemnify and hold harmless SORRENTO, SORRENTO’s Affiliates and their respective trustees, officers, agents, independent contractors and employees (“SORRENTO Indemnitees”) from any and all Liabilities resulting from Third-Party Claims arising out of or occurring as a result of: (i) any material breach of any of MAYO’s obligations, representations, warranties, or covenants under this Agreement; or (ii) the gross negligence or willful misconduct of a MAYO Indemnitee under this Agreement. MAYO’s obligation to indemnify the SORRENTO Indemnitees pursuant to this Section 9.03(b) shall not apply to the extent that any such Liabilities are the result of a material breach by SORRENTO of its obligations, representations, warranties or covenants under this Agreement or SORRENTO’s gross negligence or willful misconduct.

(c) To be eligible to be Indemnified pursuant to this Section 9.03, the indemnified Person shall provide the indemnifying Party with prompt written notice of the Third-Party Claim giving rise to the indemnification obligation pursuant to this Section 9.03 and the right to control the defense (with the reasonable cooperation of the indemnified Person) or settlement any such claim; provided, however, that the indemnifying Party shall not enter into any settlement that admits fault, wrongdoing or damages without the indemnified Person’s written consent, such consent not to be unreasonably withheld or delayed. The indemnified Person shall have the right to join, but not to control, at its own expense and with counsel of its choice, the defense of any claim or suit that has been assumed by the indemnifying Party.

(d)SORRENTO will continuously carry occurrence-based liability insurance, including products liability and contractual liability, in an amount and for a time period sufficient to cover the liability assumed by SORRENTO hereunder during the Term and after, such amount being at least Five Millions Dollars (USD $5,000,000). In addition, such policy will name MAYO and its Affiliates as additional-named insureds up to the policy limit. The minimum limits of any insurance coverage required herein shall not limit SORRENTO’s liability. SORRENTO acknowledges and agrees that the rights and remedies available to MAYO hereunder shall not be limited by the amounts of SORRENTO’s insurance coverage.

(e)SORRENTO expressly waives any right of subrogation that it may have against MAYO Indemnitees resulting from any claim, demand, liability, judgment, settlement, costs, fees (including attorneys’ fees) and expenses for which SORRENTO is obligated to indemnify, defend and hold MAYO Indemnitees harmless under this Agreement.

9.04PROHIBITION AGAINST INCONSISTENT STATEMENTS. SORRENTO shall not make any statements, representations or warranties on behalf of MAYO, nor purport to accept any liabilities or responsibilities on behalf of MAYO whatsoever that are inconsistent with any disclaimer or limitation included in this section or any other provision of this Agreement.

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Article 10.00 – Term and Termination

10.01TERM. This Agreement shall become effective as of the Effective Date, and will continue in full force and effect unless and until (a) mutually terminated in writing by the Parties, or (b) otherwise terminated pursuant to and in accordance with the terms of this Agreement (the “Term”).

10.02TERMINATION FOR BREACH.

(a)Subject to Section 11.17 (Force Majeure) and Section 10.06, if SORRENTO commits a material breach of this Agreement, including without limitation, the failure to make any required and undisputed royalty or fee payments hereunder, MAYO may notify SORRENTO in writing of such breach specifying the nature of the breach, requiring SORRENTO to cure such breach, and stating its intention to terminate this Agreement if such breach is not cured, and SORRENTO will have (a) in the event of a material payment breach, sixty (60) days after such notice to cure such breach or (b) in the event of any other material breach (including any material breach of any diligence, milestone or similar obligation hereunder), one hundred and twenty (120) days after such notice to cure such breach. If SORRENTO fails to cure such breach within the applicable aforementioned cure period, MAYO may, at its sole discretion, terminate this Agreement by sending SORRENTO written notice of termination.

(b)Subject to Section 11.17 (Force Majeure), if MAYO commits a material breach of this Agreement, SORRENTO may notify MAYO in writing of such breach specifying the nature of the breach, requiring MAYO to make good or otherwise cure such breach, and stating its intention to terminate this Agreement if such breach is not cured, and MAYO will have sixty (60) days after such notice to cure such breach. If MAYO fails to cure such breach within the applicable aforementioned cure period, SORRENTO may, at its sole discretion, terminate this Agreement by sending MAYO written notice of termination.

10.03TERMINATION FOR SUIT. MAYO does not license entities that bring suit against MAYO or its Affiliates and as such, MAYO may immediately terminate this Agreement if SORRENTO or any Sublicensee directly or indirectly brings any action or proceeding against MAYO or its Affiliates relating to the subject matter of this Agreement, except for any suit, action or claim relating to an uncured material breach of this Agreement by MAYO or its Affiliates or otherwise to enforce or affirm the terms and conditions of this Agreement or any sponsored research agreements contemplated herein.

10.04INSOLVENCY OF SORRENTO. This Agreement terminates immediately without an obligation of notice of termination to SORRENTO in the event SORRENTO ceases conducting business in the normal course, becomes insolvent or bankrupt, makes a general assignment for the benefit of creditors, admits in writing its inability to pay its debts as they are due, permits the appointment of a receiver for its business or assets or avails itself of or becomes subject to any proceeding under any statute of any governing authority relating to insolvency or the protection of rights of creditors.

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10.05TERMINATION FOR CONVENIENCE BY SORRENTO. SORRENTO may, during the Royalty Term, terminate this Agreement for no reason or for any reasons upon six (6) months’ written notice to MAYO.

10.06TERMINATION OF A LICENSED PRODUCT DUE TO ABANDONMENT OR FAILURE TO EXERCISE COMMERCIALLY REASONABLE EFFORTS. If SORRENTO and its Affiliates and Sublicensees have not undertaken any development, commercialization, or other Exploitation of a particular Licensed Product in accordance with the then current Development Plan, or otherwise have failed to exercise their required Commercially Reasonable Efforts with respect to a particular Licensed Product set forth on the then current Development Plan in accordance with the then current Development Plan, and, in either case, have failed to remedy such breach within sixty (60) days of receiving notice thereof by MAYO then, in either case, and as MAYO’s exclusive remedy and as SORRENTO’s sole liability, MAYO may, at its sole discretion, but only with respect to such Licensed Product, terminate SORRENTO’s rights to such Licensed Product or convert SORRENTO’s license to such Licensed Product to non-exclusive, in either case by providing SORRENTO written notice of such termination or conversion. For the avoidance of doubt, exercise of the foregoing rights by MAYO will not terminate or amend any other rights SORRENTO has to any other Licensed Products.

10.07RETURN/DESTRUCTION OF CONFIDENTIAL INFORMATION / MATERIALS / LICENSED PRODUCT. Subject to Section 10.08 (Effect of Termination) below (including the sell off period set forth therein), in the event of termination of this Agreement by MAYO pursuant to Sections 10.02(a), 10.03, 10.04, or 10.06, and at MAYO’s sole discretion, SORRENTO shall either return the Confidential Information, Materials and Licensed Product to MAYO or destroy it. If SORRENTO is instructed to destroy the Confidential Information, Materials and Licensed Product, SORRENTO shall provide MAYO certification of action within thirty (30) days from the date of destruction.

10.08EFFECT OF TERMINATION.

a)By MAYO for Cause or Abandonment or by SORRENTO without Cause. Without limiting SORRENTO’s rights under any sponsored research agreement(s) contemplated herein, termination of this Agreement (i) by MAYO under Sections 10.02(a), 10.03, 10.04, or 10.06, or (ii) by SORRENTO under Section 10.05 will result in termination of SORRENTO’s license rights under Section 2.01 (provided that, in the case of termination by MAYO under Section 10.06, only SORRENTO’s rights with respect to the terminated Licensed Product shall be so terminated), subject to SORRENTO’s rights under the following paragraph.

Without limiting SORRENTO’s rights under any sponsored research agreement(s) contemplated herein, upon termination of this Agreement (i) by MAYO under Sections 10.02(a), 10.03, 10.04, or 10.06, or (ii) by SORRENTO under Section 10.05, in the event MAYO provides notice to SORRENTO, SORRENTO shall assign to MAYO all right, title and interest in and to all development information to the extent solely relating to SORRENTO’s or anyone acting on their behalf, exercise of the licenses granted and subsequently hereunder, including but not limited to, any such information in vitro studies, toxicology, pharmacokinetic, efficacy, clinical and other technical data and all correspondence to and from regulatory agencies to the extent solely relating to approval of terminated Licensed Products generated by SORRENTO and/or its

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Affiliates, contractors and agents hereunder (hereinafter “Development Information”). If so required hereunder, SORRENTO shall use Commercially Reasonable Efforts to provide any such Development Information to MAYO within thirty (30) days of the date of termination. Upon termination of this Agreement by MAYO under Sections 10.02(a), 10.03 or 10.04 or by SORRENTO under Section 10.05, SORRENTO shall cease manufacturing, processing, producing, using, importing or selling all terminated Licensed Products; provided, however, that SORRENTO and its Affiliates and Sublicensees may (i) finish manufacturing terminated Licensed Products that are in the process of being manufactured at the time of termination, and (ii) continue to sell in the ordinary course of business for a period of one year (1) year those quantities of terminated Licensed Products which are fully manufactured and in SORRENTO’s normal inventory at the date of termination (or for which manufacture is completed in accordance with subclause (i) hereof), if (a) all monetary obligations of SORRENTO to MAYO have been satisfied and (b) royalties on such sales are paid to MAYO in the amounts and in the manner provided in this Agreement.

b)By SORRENTO for Cause. Termination of this Agreement by SORRENTO under Section 10.02(b) for material breach of this Agreement by MAYO, will result in the voiding of Section 3.02, licenses in Section 2.01 and the covenant set forth in Section 2.04 becoming irrevocable subject to all other applicable terms and conditions of this Agreement remaining in effect to the extent necessary for the continued payment of royalties by SORRENTO for Net Sales of Royalty Bearing Products. For the avoidance of doubt, any royalties that would be due notwithstanding SORRENTO’s termination pursuant to this Section 10.08(b), will continue to accrue and be payable to MAYO in accordance with the terms and conditions of this Agreement.

c)Expiration. Upon expiration of the Royalty Term with respect to a particular country, all rights and licenses granted to SORRENTO under this Agreement and the covenant set forth in Section 2.04, in each case with respect to such country, will become fully paid, irrevocable (except otherwise provided herein), and royalty free. For the avoidance of doubt, milestone payments due under Section 3.02 shall still remain in effect after the Royalty Term.

10.09SURVIVAL. The termination or expiration of this Agreement does not relieve either Party of its rights and obligations that have previously accrued. Subject to Sections 10.08(a) and 10.08(b), all rights granted immediately revert to MAYO after the Term. Rights and obligations that by their nature prescribe continuing rights and obligations shall survive the termination or expiration of this Agreement including Sections 4.02 (Accounting), 9.03 (Indemnification and Insurance), 10.07 (Return/Destruction of Material/Licensed Product), 10.08 (Effect of Termination), 10.09 (Survival) and Articles 1 (Definitions), 7 (Use of Name), 8 (Confidentiality) and 11 (General Provisions). SORRENTO, on behalf of itself and its Sublicensees, shall provide an accounting for and pay, within thirty (30) days of termination or expiration, all amounts due hereunder.

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Article 11.00 – General Provisions

11.01Amendments. This Agreement may not be amended or modified except by a writing signed by both Parties and identified as an amendment to this Agreement.

11.02CONSTRUCTION. Each Party acknowledges that it was provided an opportunity to seek advice of counsel and as such this Agreement shall not be construed for or against either Party. References to “including” in this Agreement shall mean “including, without limitation,” whether or not so specified.

11.03ENTIRE AGREEMENT. This Agreement constitutes the final, complete and exclusive agreement between the Parties with respect to its subject matter and supersedes all past and contemporaneous agreements, promises, and understandings, whether oral or written, between the Parties.

11.04EXPORT CONTROL. The Parties agree not to use or otherwise export or re-export anything exchanged or transferred between them pursuant to this agreement except as authorized by United States law and the laws of the jurisdiction in which it was obtained. In particular, but without limitation, items exchanged may not be exported or re-exported (a) into any U.S. embargoed countries or (b) to anyone on the U.S. Treasury Department's list of Specially Designated Nationals or the U.S. Department of Commerce Denied Person’s List or Entity List. By entering into this Agreement, each Party represents and warrants that they are not located in any such country or on any such list. Each Party also agrees that they will not use any item exchanged for any purposes prohibited by United States law, including, without limitation, the development, design, manufacture or production of missiles, or nuclear, chemical or biological weapons. In the event either Party becomes aware of any suspected violations of this paragraph that Party will promptly inform the other Party of such suspected violations, and cooperate with one another in any subsequent investigation and defense, be they civil or criminal.

11.05ANTI-CORRUPTION COMPLIANCE. The Parties, their Affiliates, and any Sublicensee, shall conduct themselves in an ethical, lawful, businesslike and professional manner in performance of this Agreement and shall comply with all Applicable Laws, regulations and directives that may apply to them in the United States or elsewhere. Without limiting the foregoing and for avoidance of doubt, SORRENTO, its Affiliates and any Sublicensee, shall obey all Applicable Laws or regulations in SORRENTO’s applicable jurisdictions and shall also obey the U.S. Foreign Corrupt Practices Act (“FCPA”) (15 USC §§ 78dd-1, et seq.) and any similar applicable anti-bribery provisions, laws or regulations. Each Party shall reasonably assist the other Party(ies) to assure such compliance at all times during the term of this Agreement. SORRENTO’s, its Affiliates’, or any Sublicensees’ failure to adhere to the requirements of this section shall be grounds for Mayo to terminate this Agreement for cause pursuant to Section 10.02.

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11.06GOVERNING LAW AND JURISDICTION. The terms and conditions of this Agreement, as well as all disputes arising under or relating to this Agreement, shall be governed by New York law, specifically excluding its choice-of-law principles, except that the interpretation, validity and enforceability of the Patent Rights will be governed by the patent laws of the country in which the patent application is pending or issued. This is not an Agreement for the sale of goods and as such Article 2 of the Uniform Commercial Code as enacted in New York does not apply.

11.07HEADINGS. The headings of articles and sections used in this document are for convenience of reference only.

11.08INDEPENDENT CONTRACTORS. It is mutually understood and agreed that the relationship between the Parties is that of independent contractors. Neither Party is the agent, employee, or servant of the other. Except as specifically set forth herein, neither Party shall have nor exercise any control or direction over the methods by which the other Party performs work or obligations under this Agreement. Further, nothing in this Agreement is intended to create any partnership, joint venture, lease or equity relationship, expressly or by implication, between the Parties.

11.09INDUCEMENT OF REFERRALS. It is not the purpose of this Agreement or the intent of the Parties to induce or encourage the referral of patients, and there is no requirement under this Agreement or under any other Agreement between the Parties that SORRENTO or its staff refer patients to MAYO for products or services. No payment made under this Agreement is made in return for the referral of patients, or is made in return for the purchasing, leasing, or ordering of any products or services.

11.10LIMITATION OF RIGHTS CREATED. This Agreement is personal to the Parties and shall be binding on and inure to the sole benefit of the Parties and their permitted successors and assigns and shall not be construed as conferring any rights to any third party except as expressly stated herein. Specifically, no interests are intended to be created for any customer, patient, research subjects, or other persons (or their relatives, heirs, dependents, or personal representatives) by or upon whom the Licensed Products may be used.

11.11No Assignment. Sorrento may not assign its rights under this Agreement to any third party without the prior written consent of Mayo; provided, that Sorrento may assign any or all of its rights without the prior written consent of Mayo to an Affiliate of Sorrento or to a third party in connection with a sale of all or substantially all of a business or assets of Sorrento related to this Agreement to such third party, provided notice is promptly given to Mayo within thirty (30) days following such occurrence. In either case, Sorrento and the applicable s Affiliate or third party will agree that such Affiliate or third party will be treated as the direct licensee for all obligations and payments under this Agreement. For the avoidance of doubt, should Sorrento assign this Agreement to an Affiliate or third party, Mayo agrees that such Affiliate or third party will not be considered a sublicense as defined herein. Any purported assignment in violation of this clause is void.

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11.12NOTICES. All notices and other business communications between the Parties related to this Agreement shall be in writing, sent by certified mail, addressed as follows:

To MAYO:Mayo Foundation for Medical Education and Research

Mayo Clinic Ventures – BB4

200 First Street SW

Rochester, Minnesota 55905-0001

Attn: Ventures Operations

Phone: [...***...]

Facsimile: [...***...]

Email: [...***...]

Fed Tax ID: 41-1506440

To SORRENTO:

Sorrento Therapeutics, Inc.

4955 Directors Place

San Diego, CA 92121

Facsimile: [...***...]

Attention: Henry Ji, Ph.D., President & Chief Executive Officer

with copies, which shall not constitute notice to Sorrento, to:

Sorrento Therapeutics, Inc.

4955 Directors Place

Facsimile: [...***...]

Attention: Legal Department

and

Paul Hastings LLP

1117 S. California Avenue

Palo Alto, CA 94304

Facsimile: (650) 320-1904

Attention: Jeffrey Hartlin, Esq.

Fed Tax ID: 33-0344842

Invoicing Contact:

Janie Shi c/o Accounts Payable

Sorrento Therapeutics, Inc.

4955 Directors Place

San Diego, CA 92121

Phone: [...***...]

Email: [...***...]

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Expense Reimbursement Contact:

Janie Shi c/o Accounts Payable

Sorrento Therapeutics, Inc.

4955 Directors Place

San Diego, CA 92121

Phone: [...***...]

Email: [...***...]

Notices sent by certified mail shall be deemed delivered on the third day following the date of mailing. Either Party may change its address or facsimile number by giving written notice in compliance with this section.

11.13REGISTRATION OF LICENSES. As between the Parties, SORRENTO will have the right, to register and give any required notice concerning this Agreement, at its expense, in each country in the Territory where an obligation under law exists to so register or give notice.

11.14RESEARCH AND CLINICAL TRIALS. The Parties acknowledge that any SORRENTO sponsored research or clinical trial at MAYO related to this Agreement will be subject to a separate agreement consisting of a defined protocol, associated budget and any terms and conditions that may be required by law or MAYO policy, in each case as mutually agreed between the Parties.

11.15SEVERABILITY. In the event any provision of this Agreement is held to be invalid or unenforceable, the remainder of this Agreement shall remain in full force and effect as if the invalid or unenforceable provision had never been a part of the Agreement.

11.16WAIVER. The failure of either Party to complain of any default by the other Party or to enforce any of such Party’s rights, no matter how long such failure may continue, will not constitute a waiver of the Party’s rights under this Agreement. The waiver by either Party of any breach of any provision of this Agreement shall not be construed as a waiver of any subsequent breach of the same or any other provision. No part of this Agreement may be waived except by the further written agreement of the Parties.

11.17FORCE MAJEURE. No Party shall be liable for a failure or delay in performing any of its obligations under this Agreement to the extent that such failure or delay is due to causes beyond the reasonable control of the affected Party, including: (a) acts of God; (b) fire, explosion, or unusually severe weather; (c) war, invasion, riot, terrorism, or other civil unrest; (d) governmental laws, orders, restrictions, actions, embargo or blockages; (e) national or regional emergency; (f) strikes or industrial disputes at a national level which directly impact the affected Party’s performance under this Agreement; (g) epidemics, pandemics, or disease outbreak (including the novel coronavirus (COVID-19) pandemic) and steps required under Applicable Law in light of any such epidemic, pandemic, or disease outbreak; (h) regulatory delays, including any delay or inaction by a Regulatory Authority; or (i) other similar cause outside of the reasonable control of such Party (“Force Majeure”); provided that the Party affected shall promptly notify the other of the Force Majeure condition and shall eliminate, cure or overcome any such causes and to resume performance of its obligations as soon as possible.

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11.18COMPLIANCE WITH LAWS. Both SORRENTO and MAYO shall perform their obligations under this Agreement in accordance with Applicable Law and each Party shall bear its own costs in ensuring compliance therewith. No Party shall, or shall be required to, undertake any activity under or in connection with this Agreement that violates, or which it reasonably believes may violate, any Applicable Law.

11.19COUNTERPARTS. This Agreement may be executed in any number of counterparts which, when taken together, will constitute an original, and photocopy, facsimile, electronic or other copies shall have the same effect for all purposes as an ink-signed original. Each Party hereto consents to be bound by photocopy, facsimile, or electronic signatures of such Party’s authorized representative hereto.


Mayo Foundation for Medical Education and Research		SORRENTO Therapeutics, Inc.

By	/s/ James A. Rogers III	By	/s/ Henry Ji, Ph.D.
Name:	James A. Rogers III	Name:	Henry Ji, Ph.D.
Title:	Assistant Secretary	Title:	President and CEO

Date:	9/8/2020	Date:	9/8/2020

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Exhibit C

Form of Selling Stockholder Questionnaire

SORRENTO THERAPEUTICS, INC.

SELLING STOCKHOLDER NOTICE AND QUESTIONNAIRE

The undersigned holder of shares of Common Stock issued by SORRENTO Therapeutics, Inc. (the “Company”) understands that the Company intends to file with the Securities and Exchange Commission a registration statement on Form S-3 (the “Resale Registration Statement”) for the registration and the resale under Rule 415 of the Securities Act of 1933, as amended (the “Securities Act”), of the Registrable Securities in accordance with the terms of the Patent and Know-How License Agreement, dated September 8, 2020, by and between the Company and MAYO Foundation for Medical Education and Research thereto (the “Agreement”). All capitalized terms not otherwise defined herein shall have the meanings ascribed thereto in the Agreement.

In order to sell or otherwise dispose of any Registrable Securities pursuant to the Resale Registration Statement, a holder of Registrable Securities generally will be required to be named as a selling stockholder in the related prospectus or a supplement thereto (as so supplemented, the “Prospectus”), deliver the Prospectus to purchasers of Registrable Securities (including pursuant to Rule 172 under the Securities Act) and be bound by the provisions of the Agreement. Holders must complete and deliver this notice and questionnaire (“Notice and Questionnaire”) in order to be named as selling stockholders in the Prospectus. Certain legal consequences arise from being named as a selling stockholder in the Resale Registration Statement and the Prospectus. Holders of Registrable Securities are advised to consult their own securities law counsel regarding the consequences of being named or not named as a selling stockholder in the Resale Registration Statement and the Prospectus.

NOTICE

The undersigned holder (the “Selling Stockholder”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities owned by it and listed below in Part III(b) pursuant to the Resale Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands and agrees that it will be bound by the terms and conditions of this Notice and Questionnaire and the Agreement.

The undersigned hereby provides the following information to the Company and represents and warrants that such information is materially accurate and complete:

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QUESTIONNAIRE

PART 1. Name:

1.1Full legal name of the Selling Stockholder:

1.2Full legal name of the registered holder (if not the same as Part I(a) above) through which the Registrable Securities listed in Part III below are held:

1.3Full legal name of any natural control person (which means a natural person who directly or indirectly alone or with others has power to vote or dispose of the Registrable Securities listed in Part III below):

PART II. Notices to Selling Stockholder:

(a)Address:

(b)Telephone:

(c)Fax:

(d)Contact person:

(e)E-mail address of contact person:

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PART III. Beneficial Ownership of Registrable Securities:

(a)Type and number of Registrable Securities beneficially owned:

(b)Number of shares of Common Stock to be registered for resale pursuant to this Notice and Questionnaire:

PART IV. Broker-Dealer Status:

(a)Are you a broker-dealer?

Yes ☐No ☐

(b)If you answered “yes” to Part IV(a) above, did you receive your Registrable Securities as compensation for investment banking services provided to the Company?

Yes ☐No ☐

Note:If you answered “no”, the SEC’s staff has indicated that you should be identified as an underwriter in the Resale Registration Statement.

(c)Are you an affiliate of a broker-dealer?

Yes ☐No ☐

If you answered “yes”, provide a narrative explanation below:

(d)If you are an affiliate of a broker-dealer, do you certify that you bought the Registrable Securities in the ordinary course of business, and at the time of the purchase of the Registrable Securities to be resold, you had no agreements or understandings, directly or indirectly, with any Person to distribute the Registrable Securities?

Yes ☐No ☐

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Note:If you answered “no”, the SEC’s staff has indicated that you should be identified as an underwriter in the Resale Registration Statement.

PART V. Beneficial Ownership of Other Securities of the Company Owned by the Selling Stockholder:

Except as set forth below in this Part V, the undersigned is not the beneficial or registered owner of any securities of the Company, other than the Registrable Securities listed above in Part III.

Type and amount of other securities beneficially owned:

PART VI. Relationships with the Company:

(a)Have you or any of your affiliates, officers, directors or principal equity holders (owners of 5% or more of the equity securities of the undersigned) held any position or office or have you had any other material relationship with the Company (or its predecessors or affiliates) within the past three years?

Yes ☐No ☐

(b)If your response to Part VI(a) above is “yes”, please state the nature and duration of your relationship with the Company:

PART VII. Plan of Distribution:

The undersigned has reviewed the form of Plan of Distribution attached as Annex A hereto, and hereby confirms that, except as set forth below, the information contained therein regarding the undersigned and its plan of distribution is correct and complete.

State any exceptions here:

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The undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof and prior to the effective date of any applicable Resale Registration Statement. All notices hereunder shall be delivered as set forth in the Agreement. In the absence of any such notification, the Company shall be entitled to continue to rely on the accuracy of the information in this Notice and Questionnaire.

By signing below, the undersigned consents to the disclosure of the information contained herein in its answers to Parts I through VII above and the inclusion of such information in the Resale Registration Statement and the Prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of any such Resale Registration Statement and Prospectus.

By signing below, the undersigned acknowledges that it understands its obligation to comply, and agrees that it will comply, with the provisions of the Exchange Act and the rules and regulations thereunder, particularly Regulation M in connection with any offering of Registrable Securities pursuant to the Resale Registration Statement. The undersigned also acknowledges that it understands that the answers to this Notice and Questionnaire are furnished for use in connection with registration statements filed pursuant to the Agreement and any amendments or supplements thereto filed with the SEC pursuant to the Securities Act.

The undersigned confirms that, to the best of his/her knowledge and belief, the foregoing answers to this Notice and Questionnaire are correct.

IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.


Dated:

Selling Stockholder:

Name of Entity or Individual


By:
Name:
Title:

Exhibit 10.7

CHANGE OF CONTROL SEVERANCE AGREEMENT

THIS CHANGE OF CONTROL SEVERANCE AGREEMENT (this “Agreement”), dated as of November 5, 2020 (the “Effective Date”), is made by and between Sorrento Therapeutics, Inc., a Delaware corporation (together with any successor thereto, the “Company”), and Najjam Asghar (the “Executive”) (collectively referred to herein as the “Parties”).

Whereas, the Board of Directors of the Company (the “Board”) has determined that it is in the best interests of the Company and its stockholders to (i) assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below), and (ii) provide Executive with an incentive to continue Executive’s employment prior to a Change of Control and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders;

Whereas, the Board believes that it is imperative to provide Executive with certain severance benefits upon Executive’s termination of employment following a Change of Control; and

Whereas, the benefits described in this Agreement are intended to provide Executive with enhanced financial security, and incentive and encouragement to remain with the Company, notwithstanding the possibility of a Change of Control.

Now, Therefore, in consideration of the foregoing and of the respective covenants and agreements set forth below, the Parties hereto agree as follows:

1.Duration of Agreement. The term of this Agreement will commence on the date hereof and shall continue until the earliest of: (a) a termination by written consent of the Parties; and (b) a termination of Executive’s employment for any reason. Notwithstanding the previous sentence, if Executive becomes entitled to benefits under this Agreement, this Agreement will terminate when all of the obligations of the Parties with respect to this Agreement have been satisfied.

2.Certain Definitions. For purposes of this Agreement:

(a)“Cause” shall mean (i) Executive’s dishonesty that is intended to materially injure the business of the Company or its affiliates; (ii) Executive’s conviction of a felony; or (iii) Executive’s wanton or willful dereliction of duties that is not cured within thirty (30) days after Executive is provided written notice of such dereliction of duties by the Company.

(b)“Change of Control” shall mean: (i) a sale or exclusive license of all or substantially all of the assets of the Company; (ii) a merger or consolidation in which the Company is not the surviving corporation (other than a merger or consolidation in which stockholders immediately before the merger or consolidation own, immediately after the merger or consolidation, more than fifty percent (50%) of the combined outstanding voting power of the surviving entity or the parent company of the surviving entity in such merger or consolidation); (iii) a merger or consolidation in which the Company is the surviving corporation but the shares of the Company’s common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise (other

than a reverse merger in which stockholders immediately before the merger own, immediately after the merger, more than fifty percent (50%) of the combined outstanding voting power of the surviving entity or the parent company of the surviving entity in such reverse merger); or (iv) any transaction or series of related transactions in which in excess of fifty percent (50%) of the Company’s voting power is transferred, other than the sale or issuance by the Company of stock in a transaction or series of transactions (A) the primary purpose of which is to raise capital for the Company’s operations and activities or (B) in which such stock is issued for consideration other than cash pursuant to an acquisition by the Company of one or more other entities.

(c)“Change of Control Window” means the period beginning three (3) months immediately prior to a Change of Control and ending twelve (12) months immediately following a Change of Control.

(d)“Code” shall mean the Internal Revenue Code of 1986, as amended.

(e)“Disability” shall mean, at any time the Company or any of its affiliates sponsors a long-term disability plan for the Company’s employees, “disability” as defined in such long-term disability plan for the purpose of determining a participant’s eligibility for benefits; provided, however, if the long-term disability plan contains multiple definitions of disability, “Disability” shall refer to that definition of disability which, if Executive qualified for such disability benefits, would provide coverage for the longest period of time. The determination of whether Executive has a Disability shall be made by the person or persons required to make disability determinations under the long-term disability plan. At any time the Company does not sponsor a long-term disability plan for its employees, Disability shall mean Executive’s inability to perform, with reasonable accommodation, the essential functions of Executive’s position hereunder for a total of ninety (90) days during any one-year period as a result of incapacity due to mental or physical illness. Any refusal by Executive to submit to a medical examination for the purpose of determining Disability shall be deemed to constitute conclusive evidence of Executive’s Disability. Should a dispute occur between Executive and the Company concerning whether or not a Disability exists, a doctor selected by Executive and a doctor selected by the Company shall be entitled to examine Executive. If the opinion of Executive’s doctor and the Company’s doctor conflict, Executive’s doctor and the Company’s doctor shall agree upon a third doctor, whose opinion shall be binding.

(f)“Good Reason” shall mean if the Executive resigns within ninety (90) days after any of the following events, unless Executive consents to the applicable event: (i) a decrease in Executive’s annual base salary or annual target bonus opportunity; (ii) a material decrease in the Executive’s duties, authority or areas of responsibility as are commensurate with such Executive’s title or position (other than in connection with a corporate transaction where the Executive continues to hold the position with the Company held as of the date of this Agreement with respect to the Company’s business, substantially as such business exists prior to the date of consummation of such corporate transaction, but does not hold such position with respect to the successor corporation); (iii) a change in Executive’s title or Executive being required to report to anyone other than directly to the Company’s Chief Executive Officer; or (iv) the relocation of the Executive’s primary office to a location more than thirty-five (35) miles from the Company’s then current headquarters. Notwithstanding the foregoing, no Good Reason will have occurred unless and until Executive has: (A) provided the Company, within sixty (60) days of Executive’s

knowledge of the occurrence of the facts and circumstances underlying the Good Reason event, written-notice stating with specificity the applicable facts and circumstances underlying such finding of Good Reason; and (B) provided the Company with an opportunity to cure the same within thirty (30) days after the receipt of such notice.

(g)“Qualifying Termination” shall mean a termination of Executive’s employment by the Company without Cause or by Executive for Good Reason, in each case during the Change of Control Window.

3.At Will Employment; Termination; Severance.

(a)At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and will continue to be at-will, as defined under applicable law. As an at-will employee, either the Company or the Executive may terminate the employment relationship at any time, with or without Cause. If Executive’s employment terminates for any reason other than a Qualifying Termination, Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing written severance and benefits plans and practices or pursuant to other written agreements with the Company.

(b)Notice of Termination. Any termination of Executive’s employment by the Company for Cause or by Executive for Good Reason shall be communicated by a written notice to the other Party (i) indicating the specific termination provision in this Agreement relied upon, and (ii) specifying a Date of Termination (as defined below) which, if submitted by Executive, shall be at least thirty (30) days following the date of such notice (a “Notice of Termination”); provided, however, that in the event that Executive delivers a Notice of Termination to the Company, the Company may, in its sole discretion, change the Date of Termination to any date that occurs following the date of Company’s receipt of such Notice of Termination and is prior to the date specified in such Notice of Termination. A Notice of Termination submitted by the Company may provide for a Date of Termination on the date Executive receives the Notice of Termination, or any date thereafter elected by the Company in its sole discretion. For purposes of this Agreement, “Date of Termination” shall mean either the date indicated in the Notice of Termination or the date specified by the Company pursuant to this Section 3(b), whichever is earlier.

(c)Termination without Cause or for Good Reason in Connection with a Change of Control. In the event of the termination of the Executive’s employment by the Company without Cause or by Executive due to a resignation for Good Reason, in either case during the Change of Control Window then, subject to Executive signing on or before the forty-fifth (45th) day following Executive’s Separation from Service (as defined below) and not revoking, a release of claims in substantially the form attached hereto as Exhibit A (the “Release”), and Executive’s continued compliance with Section 4, Executive shall receive the following:

(i)an amount equal to the Executive’s then current annual base salary, payable in a lump sum on the First Payment Date;

(ii)an amount equal to the Executive’s target annual bonus for the fiscal year in which the termination occurs, payable in a lump sum on the First Payment Date; provided, however, that the aggregate amount of such payment shall in no event be less than the annual bonus paid by the Company to Executive with respect to the immediately prior fiscal year;

(iii)for the twelve (12) month period following Executive’s Separation from Service (or, if earlier, the date on which the applicable continuation period under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) expires), the Company shall arrange to provide Executive and his eligible dependents who were covered under the Company’s health insurance plans as of the date of Executive’s Separation from Service with health (including medical and dental) insurance benefits substantially similar to those provided to such dependents immediately prior to the date of such Separation from Service. For the avoidance of doubt, the Company reimbursing Executive for premiums to continue Executive’s Company health benefits under COBRA (for Executive and those dependents covered immediately prior to the date of the Separation from Service), if Executive validly elects such benefits, shall satisfy the Company’s obligations to provide health insurance benefits under the preceding sentence. If the Company is not reasonably able to continue health insurance benefits coverage under the Company’s insurance plans, the Company shall provide substantially equivalent coverage under other third party insurance sources. If any of the Company’s health benefits are self-funded as of the date of Executive’s Separation from Service, or if, in the Company’s sole discretion, the Company cannot provide the foregoing benefits in a manner that is exempt from Section 409A of the Code or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health Service Act), instead of providing continued health insurance benefits as set forth above, the Company shall instead pay to Executive an amount equal to twelve (12) multiplied by the monthly premium Executive would be required to pay for continuation coverage pursuant to COBRA for his eligible dependents who were covered under the Company’s health plans as of the date of Executive’s Separation from Service (calculated by reference to the premium as of the date of Separation from Service), which amount shall be paid on the First Payment Date; and

(iv)full vesting of Executive’s outstanding awards of equity compensation (including, without limitation, stock options, stock appreciation rights, restricted stock awards, and restricted stock units), with all performance-based vesting criteria, if any, deemed satisfied at target.

(d)No Other Compensation. Except as otherwise expressly required by law (e.g., COBRA), in the event of a Qualifying Termination, the provisions of this Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. Executive will be entitled to no benefits, compensation or other payments or rights upon a Qualifying Termination other than as set forth in Section 3(c) and the sum of: (i) the portion of Executive’s annual base salary earned through the Date of Termination but not yet paid to Executive; (ii) any unreimbursed reimbursable expenses; (iii) any amount accrued and arising from Executive’s participation in, or vested benefits accrued under any employee benefit plans, programs or arrangements, including, without limitation, any 401(k), profit sharing or pension plan (collectively, the “Company Arrangements”), which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements; and (iv) any other amounts required under applicable law.

(e)Deemed Resignation. Upon a Qualifying Termination, Executive shall be deemed to have resigned from all offices and directorships, if any, then held with the Company or any of its affiliates. Executive agrees to execute any paperwork consistent with the foregoing that the Company may reasonably request.

(f)Best Pay Provision

(i)If any payment or benefit Executive would receive under this Agreement, when combined with any other payment or benefit Executive receives pursuant to the termination of Executive’s employment with the Company and its affiliates (“Payment”), would (A) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (B) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall be either (1) the full amount of such Payment or (2) such lesser amount (with cash Payments being reduced first, in reverse order of receipt, then reduction of equity award vesting acceleration, with performance-based vesting acceleration reduced before time-based vesting, proportional to each performance-based vesting award, and time-based vesting acceleration reduced in reverse order of scheduled vesting, then all other Payments pro-rata) as would result in no portion of any Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local employment taxes, income taxes, and the Excise Tax, results in Executive’s receipt, on an after-tax basis, of the greater amount of Payments notwithstanding that all or some portion of the Payments may be subject to the Excise Tax.

(ii)All determinations required to be made under this Section 3(f), including whether and to what extent the Payments shall be reduced and the assumptions to be utilized in arriving at such determination, shall be made by the nationally recognized certified public accounting firm used by the Company immediately prior to the effective date of the Change of Control or, if such firm declines to serve, such other nationally recognized certified public accounting firm as may be designated by the Company (the “Accounting Firm”). The Accounting Firm shall provide detailed supporting calculations both to Executive and the Company at such time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding upon Executive and the Company. For purposes of making the calculations required by this Section 3(f), the Accounting Firm may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good-faith interpretations concerning the application of Sections 280G and 4999 of the Code.

4.Restrictive Covenants.

(a)General. Executive acknowledges that the Company has provided and, during the term of this Agreement, the Company from time to time will continue to provide Executive with, access to its proprietary information. Ancillary to the rights provided to Executive as set forth in this Agreement and the Company’s provision of confidential information, and Executive’s agreements regarding the use of same, in order to protect the value of any confidential information, the Company and Executive agree to the following provisions (A) against unfair competition, (B) respecting Executive’s use of proprietary information and the protection of such information, and (C) the ownership of inventions developed by Executive in the course of Executive’s

engagement or employment by or relationship with the Company, which Executive acknowledges represent a fair balance of the Company’s rights to protect its business and Executive’s right to pursue employment.

(b)Noncompetition; Nonsolicitation.

(i)Noncompetition. Executive shall not, at any time during the term of this Agreement, directly or indirectly engage in, have any equity interest in, manage, provide services to or operate any person, firm, corporation, partnership or business (whether as director, officer, employee, agent, representative, partner, security holder, consultant or otherwise) that engages in any business which competes in any material respect with any portion of the Business (as defined below) of the Company anywhere in the world. Nothing herein shall prohibit Executive from being a passive owner of not more than two percent (2%) of the outstanding equity interest in any entity that is publicly traded, so long as Executive has no active participation in the business of such entity.

(ii)Nonsolicitation. Executive shall not, at any time during the Restriction Period, directly or indirectly, recruit or otherwise solicit or induce any non-customer/client business relation of the Company to (A) terminate or reduce its arrangement or business with the Company, or (B) to otherwise change its relationship with the Company. Subject to applicable law, Executive shall not, at any time during the Restriction Period, directly or indirectly, either for Executive or for any other person or entity, intentionally solicit any employee or independent contractor of the Company to terminate his or her employment or arrangement with the Company. Notwithstanding the foregoing, this Section 4(b)(ii) shall not prohibit Executive from, directly or indirectly, either for Executive or for any other person or entity, (i) engaging in general solicitation efforts not specifically targeting employees of the Company or participating in job fair events or (ii) hiring any employee or independent contractor of the Company who responds to any such general employment solicitation effort.

(iii)Blue Penciling. In the event the terms of this Section 4(b) shall be determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too great a period of time or over too great a geographical area or by reason of its being too extensive in any other respect, it will be interpreted to extend only over the maximum period of time for which it may be enforceable, over the maximum geographical area as to which it may be enforceable, or to the maximum extent in all other respects as to which it may be enforceable, all as determined by such court in such action.

(c)Proprietary Information and Inventions Agreement. Executive and the Company have executed the Company’s standard Proprietary Information and Inventions Agreement, which agreement is attached hereto as Exhibit B and incorporated herein by reference (the “Proprietary Information and Inventions Agreement”). Executive agrees to perform each and every obligation of his therein contained.

(d)Return of Property. Upon a Qualifying Termination, Executive will promptly deliver to the Company all correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents or property concerning the Company’s customers, business plans, marketing strategies, products, property or processes.

(e)Non-Disparagement. Each Party (which, in the case of the Company, shall mean its officers and the members of the Board) agrees, during the term of this Agreement and following the Date of Termination, to refrain from Disparaging (as defined below) the other Party and its affiliates, including, in the case of the Company, any of its services, technologies or practices, or any of its directors, officers, agents, representatives or stockholders, either orally or in writing. Nothing in this paragraph shall preclude any Party from making truthful statements that are reasonably necessary to comply with applicable law, regulation or legal process, or to defend or enforce a Party’s rights under this Agreement, and nothing herein shall preclude any Party from reporting a suspected violation of law to the appropriate governmental authority or agency. For purposes of this Agreement, “Disparaging” means remarks, comments or statements, whether written or oral, that are intended to impugn the character, integrity, reputation or abilities of the person or entity being disparaged.

(f)Definitions. As used in this Section 4, (i) the term “Company” shall include the Company and its direct and indirect parents and subsidiaries; (ii) the term “Business” shall mean the business of the Company, as such business may be expanded or altered by the Company during the term of this Agreement; and (iii) the term “Restriction Period” shall mean the period beginning on the Effective Date and ending on the date that is twelve (12) months following the Date of Termination.

(g)Rights and Remedies Upon Breach. It is recognized and acknowledged by Executive that a breach of the covenants contained in this Section 4 may cause irreparable damage to Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate. Accordingly, Executive agrees that in the event of a breach of any of the covenants contained in this Section 4, in addition to any other remedy which may be available at law or in equity, the Company will be entitled to specific performance and injunctive relief. In addition, in the event Executive breaches any of the provisions of this Section 4, as finally determined by a court of competent jurisdiction, and such breach is not cured within thirty (30) days after receipt by Executive of written notice thereof from the Company, the Company shall be entitled to immediately cease all payments under Section 3(c).

(h)Acknowledgment by Executive. Executive has carefully read and considered the provisions of this Section 4, and, having done so, agrees that the restrictions set forth in this Section 4, including, but not limited to, the Restriction Period, are fair and reasonable and are reasonably required for the protection of the interests of the Company and its parent or subsidiary corporations, officers, directors, shareholders, and other employees.

5.Assignment and Successors. The Company may assign its rights and obligations under this Agreement to any affiliate or to any successor to all or substantially all of the business or the assets of the Company (by merger or otherwise), and may collaterally assign or encumber this Agreement and its rights hereunder as security for indebtedness of the Company and its affiliates. The Company shall require any successor (whether direct or indirect, by purchase, merger or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and to agree in writing to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place; provided, however, that no such assumption shall relieve the Company of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of the Company, Executive and

their respective successors, assigns, personnel and legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as applicable. None of Executive’s rights or obligations may be assigned or transferred by Executive, other than Executive’s rights to payments hereunder, which may be transferred only by will or operation of law. Notwithstanding the foregoing, Executive shall be entitled, to the extent permitted under applicable law and applicable Company Arrangements, to select and change a beneficiary or beneficiaries to receive compensation hereunder following Executive’s death by giving written notice thereof to the Company.

6.Miscellaneous Provisions.

(a)Governing Law; Venue. This Agreement shall be governed, construed, interpreted and enforced in accordance with its express terms, and otherwise in accordance with the substantive laws of the State of California without reference to the principles of conflicts of law of the State of California or any other jurisdiction, and where applicable, the laws of the United States. Any suit brought hereon shall be brought in the state or federal courts sitting in San Diego, California, the Parties hereby waiving any claim or defense that such forum is not convenient or proper. Each Party hereby agrees that any such court shall have in personam jurisdiction over him or it and consents to service of process in any manner authorized by California law.

(b)Validity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

(c)Notices. Any notice, request, claim, demand, document and other communication hereunder to any Party shall be effective upon receipt (or refusal of receipt) and shall be in writing and delivered personally or sent by facsimile or certified or registered mail, postage prepaid, as follows:

(i)If to the Company:

Sorrento Therapeutics, Inc.

4955 Directors Place

San Diego, CA 92121

Attention: Chief Executive Officer

Facsimile: (858) 203-4028

(ii)If to Executive, at the last address that the Company has in its personnel records for Executive.

(iii)At any other address as any Party shall have specified by notice in writing to the other Party.

(d)Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same Agreement. Signatures delivered by facsimile shall be deemed effective for all purposes.

(e)Entire Agreement. The terms of this Agreement, together with the Proprietary Information and Inventions Agreement, are intended by the Parties to be the final expression of

their agreement with respect to the subject matter hereof and supersede all prior understandings and agreements, whether written or oral, including, without limitation, any offer letter, employment or consulting agreement between the Company and Executive with respect to severance benefits upon a Change of Control. The Company shall be entitled to enforce any and all such agreements against Executive to ensure that the Company receives the benefit of all such agreements. The Parties further intend that this Agreement shall constitute the complete and exclusive statement of their terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, or other legal proceeding to vary the terms of this Agreement.

(f)Amendments; Waivers. This Agreement may not be modified, amended, or terminated except by an instrument in writing, signed by Executive and a duly authorized officer of Company. By an instrument in writing similarly executed, Executive or a duly authorized officer of the Company may waive compliance by the other Party with any specifically identified provision of this Agreement that such other Party was or is obligated to comply with or perform; provided, however, that such waiver shall not operate as a waiver of, or estoppel with respect to, any other or subsequent failure. No failure to exercise and no delay in exercising any right, remedy, or power hereunder preclude any other or further exercise of any other right, remedy, or power provided herein or by law or in equity.

(g)No Inconsistent Actions. The Parties hereto shall not voluntarily undertake or fail to undertake any action or course of action inconsistent with the provisions or essential intent of this Agreement. Furthermore, it is the intent of the Parties hereto to act in a fair and reasonable manner with respect to the interpretation and application of the provisions of this Agreement.

(h)Construction. This Agreement shall be deemed drafted equally by both the Parties. Its language shall be construed as a whole and according to its fair meaning. Any presumption or principle that the language is to be construed against any Party shall not apply. The headings in this Agreement are only for convenience and are not intended to affect construction or interpretation. Any references to paragraphs, subparagraphs, sections or subsections are to those parts of this Agreement, unless the context clearly indicates to the contrary. Also, unless the context clearly indicates to the contrary, (i) the plural includes the singular and the singular includes the plural; (ii) “and” and “or” are each used both conjunctively and disjunctively; (iii) “any,” “all,” “each,” or “every” means “any and all,” and “each and every”; (iv) “includes” and “including” are each “without limitation”; (v) “herein,” “hereof,” “hereunder” and other similar compounds of the word “here” refer to the entire Agreement and not to any particular paragraph, subparagraph, section or subsection; and (vi) all pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the entities or persons referred to may require.

(i)Arbitration. Both Executive and the Company agree to submit any and all disputes, controversies, or claims based upon, relating to, or arising from your employment by the Company (other than workers’ compensation claims) or the terms, interpretation, performance, breach, or arbitrability of this Agreement to final and binding arbitration before a single neutral arbitrator in San Diego County, California. Subject to the terms of this paragraph, the arbitration proceedings shall be initiated in accordance with, and governed by, the applicable rules (the “Rules”) for the resolution of employment disputes of the American Arbitration Association (“AAA”) (such rules previously referred to as the National Rules for the Resolution of Employment Disputes). The

Executive acknowledges that a copy of the current Rules have been provided to him. The arbitrator shall be appointed by agreement of the Parties hereto or, if no agreement can be reached, by the AAA pursuant to its Rules. Notwithstanding the Rules, the Parties may take discovery in accordance with Sections 1283.05(a)-(d) of the California Code of Civil Procedure (but not subject to the restrictions of Section 1283.05(e)), and prior to the arbitration hearing the Parties may file, and the arbitrator shall rule on, pre-trial motions such as demurrers and motions for summary judgment (applying the procedural standard embodied in Rule 56 of the Federal Rules of Civil Procedure). The time for filing such motions shall be determined by the arbitrator. The arbitrator will rule on all pre-trial motions at least ten (10) business days prior to the scheduled hearing date. Arbitration may be compelled, the arbitration award shall be enforced, and judgment thereon shall be entered, pursuant to the California Arbitration Act (Code of Civil Procedure §§ 1280 et seq.). Each Party shall bear his or its own attorneys’ fees and costs (including expert witness fees) incurred in connection with the arbitration; provided, however, Executive and the Company agree that, to the extent permitted by law, the arbitrator may, in his or her discretion, award reasonable attorneys’ fees to the prevailing party. The Company shall bear all other costs and expenses of arbitration, including AAA’s administrative fees and the arbitrator’s fees and costs. If either Party is required to compel arbitration of a dispute governed by this paragraph, the Party prevailing in that proceeding shall be entitled to recover from the other Party reasonable costs and attorneys’ fees incurred to compel arbitration. This Section 6(i) is intended to be the exclusive method for resolving any and all claims by Executive or the Company against each other for payment of damages under this Agreement or relating to Executive’s employment or service; provided, however, that neither this Agreement nor the submission to arbitration shall limit Executive’s or the Company’s right to seek provisional relief, including without limitation injunctive relief, in any court of competent jurisdiction. Both Executive and the Company expressly waive their respective rights to a jury trial.

(j)Enforcement. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a portion of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

(k)Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.

(l)Survival. The covenants, agreements, representations and warranties contained in or made in Sections 3, 4 and 6 shall survive any termination of this Agreement, subject to any time limits set forth therein.

(m)Section 409A.

(i)General. The intent of the Parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance promulgated thereunder (collectively, “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.

(ii)Separation from Service. Notwithstanding anything in this Agreement to the contrary, any compensation or benefits payable under this Agreement that is considered nonqualified deferred compensation under Section 409A and is designated under this Agreement as payable upon Executive’s termination of employment shall be payable only upon Executive’s “separation from service” with the Company within the meaning of Section 409A (a “Separation from Service”) and, except as provided below, any such compensation or benefits described in Section 3(c) shall not be paid until the fifty-fifth (55^th) day following Executive’s Separation from Service (the “First Payment Date”).

(iii)Specified Employee. Notwithstanding anything in this Agreement to the contrary, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Section 409A, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company or (ii) the date of Executive’s death. Upon the first business day following the expiration of the applicable Section 409A period, all payments deferred pursuant to the preceding sentence shall be paid in a lump sum to Executive (or Executive’s estate or beneficiaries), without interest, and any remaining payments due to Executive under this Agreement shall be paid as otherwise provided herein.

(iv)Expense Reimbursements. To the extent that any reimbursements under this Agreement are subject to Section 409A, any such reimbursements payable to Executive shall be paid to Executive no later than December 31 of the calendar year following the calendar year in which the expense was incurred; provided, that Executive submits Executive’s reimbursement request promptly following the date the expense is incurred, the amount of expenses reimbursed in one calendar year shall not affect the amount eligible for reimbursement in any subsequent calendar year, other than medical expenses referred to in Section 105(b) of the Code, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.

(v)Installments. Executive’s right to receive any installment payments under this Agreement, including without limitation any continuation salary payments that are payable on Company payroll dates, shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment as permitted under Section 409A. Except as otherwise permitted under Section 409A, no payment hereunder shall be accelerated or deferred unless such acceleration or deferral would not result in additional tax or interest pursuant to Section 409A.

7.Executive Acknowledgement.

Executive acknowledges that Executive has read and understands this Agreement, is fully aware of its legal effect, has not acted in reliance upon any representations or promises made by the Company other than those contained in writing herein, and has entered into this Agreement freely based on Executive’s own judgment.

[Signature Page Follows]

IN WITNESS WHEREOF, the Parties have executed this Agreement on the date and year first above written.


COMPANY:
SORRENTO THERAPEUTICS, INC.


By:	/s/ Henry Ji, Ph.D.

Name:	Henry Ji, Ph.D.

Title:	Chief Executive Officer


EXECUTIVE:


/s/ Najjam Asghar
Najjam Asghar

Exhibit A – Release Agreement

GENERAL RELEASE OF ALL CLAIMS

This General Release of all Claims (this “Agreement”) is entered into by Najjam Asghar (the “Employee”) and Sorrento Therapeutics, Inc., a Delaware corporation (together with any successor thereto, the “Company”), effective as of _____________________, but subject to the Employee’s right to revoke as set forth in Paragraph 3(c). In consideration of the promises set forth herein, the Employee and the Company agree as follows:

1.Return of Property. All files, access keys and codes, desk keys, ID badges, computers, records, manuals, electronic devices, computer programs, papers, electronically stored information or documents, telephones and credit cards, and any other property of the Company or any affiliate thereof previously in the Employee’s possession or control has been returned to the Company.

2.Severance. The Company shall pay/provide to the Employee the amounts/benefits set forth in Section 3(c) of that certain Change of Control Severance Agreement between the Company and the Employee dated as of November 5, 2020 (as may be amended or restated from time to time) (the “Severance Agreement”) in accordance with, and subject to, the provisions of the Severance Agreement.

3.General Release and Waiver of Claims.

(a)Release. Having consulted with counsel, the Employee, on behalf of him/herself and each of his/her respective heirs, executors, administrators, representatives, agents, insurers, successors and assigns (collectively, and including the Employee, the “Releasors”) hereby irrevocably and unconditionally releases and forever discharges the Company, its subsidiaries and affiliates and each of their respective officers, employees, directors, members, shareholders, parents, subsidiaries and agents (“Releasees”) from any and all claims, actions, causes of action, rights, judgments, obligations, damages, demands, accountings or liabilities of whatever kind or character (collectively, “Claims”), including, without limitation, any Claims under any federal, state, local or foreign law, that the Releasors may have, or in the future may possess, whether known or unknown, arising out of (i) the Employee’s employment relationship with and service as an employee, officer or director of the Company or any parents, subsidiaries or other affiliated companies and the termination of such relationship or service, and (ii) any event, condition, circumstance or obligation that occurred, existed or arose on or prior to the date hereof; provided, however, that the Employee does not release, discharge or waive any rights to (i) payments and benefits provided under this Agreement, (ii) benefit claims under any employee benefit plans in which Employee is a participant by virtue of his/her employment with the Company arising after the execution of this Agreement by Employee, and (iii) any indemnification rights the Employee may have in accordance with applicable law or under any director and officer liability insurance maintained by the Company with respect to liabilities arising as a result of the Employee’s service as an officer, if applicable, and employee of the Company. This Paragraph 3(a) does not apply to any Claims that the Releasors may have as of the date the Employee signs this Agreement arising

under the Federal Age Discrimination in Employment Act of 1967, as amended, and the applicable rules and regulations promulgated thereunder (“ADEA”) or any other claims that may not be released as a matter of law. Claims arising under ADEA are addressed in Paragraph 3(c) of this Agreement.

(b)Unknown Claims. The Employee acknowledges that he/she may hereafter discover Claims or facts in addition to or different from those which the Employee now knows or believes to exist with respect to the subject matter of this release and which, if known or suspected at the time of executing this release, may have materially affected this release or the Employee’s decision to enter into it. Nevertheless, the Employee, on behalf of him/herself and the other Releasors, hereby waives any right or Claim that might arise as a result of such different or additional Claims or facts. In addition, the Employee, on behalf of him/herself and the other Releasors, hereby waives any and all rights and benefits conferred upon him/her and the other Releasors by the provisions of Section 1542 of the Civil Code of the State of California, which provides as follows:

A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release, and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.

(c)Specific Release of ADEA Claims. In further consideration of the payments and benefits provided to the Employee under this Agreement, the Employee, on behalf of him/herself and the other Releasors, hereby unconditionally releases and forever discharges the Releasees from any and all Claims arising under ADEA that the Releasors may have as of the date the Employee signs this Agreement. By signing this Agreement, the Employee hereby acknowledges and confirms the following: (i) the Employee was advised by the Company in connection with his/her termination to consult with an attorney of his/her choice prior to signing this Agreement and to have such attorney explain to the Employee the terms of this Agreement, including, without limitation, the terms relating to the Employee’s release of claims arising under ADEA, and the Employee has in fact consulted with an attorney; (ii) the Employee was given a period of not fewer than 45 days to consider the terms of this Agreement and to consult with an attorney of his/her choosing with respect thereto; (iii) the Employee knowingly and voluntarily accepts the terms of this Agreement; and (iv) the Employee is providing this release and discharge only in exchange for consideration in addition to anything of value to which the Employee is already entitled. The Employee also understands that he/she has seven days following the date on which he/she signs this Agreement within which to revoke the release contained in this paragraph, by providing the Company with a written notice of his/her revocation of the release and waiver contained in this paragraph.

(d)No Assignment. The Employee represents and warrants that he/she has not assigned any of the Claims being released under this Agreement. The Company may assign this

Agreement, in whole or in part, to any affiliated company, including subsidiaries of the Company, or any successor in interest to the Company.

4.Proceedings.

(a)General Agreement Relating to Proceedings. The Employee has not filed, and except as provided in Paragraphs 4(b) and 4(c), the Employee agrees not to initiate or cause to be initiated on his/her behalf, any complaint, charge, claim or proceeding against the Releasees before any local, state or federal agency, court or other body relating to his/her employment or the termination of his/her employment, other than with respect to the obligations of the Company to the Employee under this Agreement or any indemnification rights the Employee may have as listed in Paragraph 3(a) (each, individually, a “Proceeding”), and agrees not to participate voluntarily in any Proceeding. The Employee waives any right he/she may have to benefit in any manner from any relief (whether monetary or otherwise) arising out of any Proceeding.

(b)Proceedings Under ADEA. Paragraph 4(a) shall not preclude the Employee from filing any complaint, charge, claim or proceeding challenging the validity of the Employee’s waiver of Claims arising under ADEA (which is set forth in Paragraph 3(c) of this Agreement). However, both the Employee and the Company confirm their belief that the Employee’s waiver of claims under ADEA is valid and enforceable, and that their intention is that all claims under ADEA will be waived.

(c)Certain Administrative Proceedings. In addition, Paragraph 4(a) shall not preclude the Employee from filing a charge with, or participating in any administrative investigation or proceeding by, the Equal Employment Opportunity Commission, National Labor Relations Board, or another fair employment practices agency. The Employee is, however, waiving his/her right to recover money in connection with any such charge or investigation. The Employee is also waiving his/her right to recover money in connection with a charge filed by any other entity or individual, or by any federal, state or local agency.

5.Severability Clause. In the event that any provision or part of this Agreement is found to be invalid or unenforceable, only that particular provision or part so found, and not the entire Agreement, shall be inoperative.

6.Nonadmission. Nothing contained in this Agreement shall be deemed or construed as an admission of wrongdoing or liability on the part of the Company.

7.Governing Law and Forum. This Agreement and all matters or issues arising out of or relating to your employment with the Company shall be governed by the laws of the State of California applicable to contracts entered into and performed entirely therein. Any action to enforce this Agreement shall be brought solely in the state or federal courts located in San Diego County, California.

8.Arbitration. Any dispute or controversy arising under or in connection with this Agreement or otherwise in connection with the Executive’s employment by the Company that

cannot be mutually resolved by the parties to this Agreement and their respective advisors and representatives shall be settled exclusively by arbitration in accordance with the provisions of Section 6(i) of the Severance Agreement.

9.Notices. Notices under this Agreement must be given as is specified in Section 6(c) of the Severance Agreement.

THE EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS READ THIS AGREEMENT AND THAT HE/SHE FULLY KNOWS, UNDERSTANDS AND APPRECIATES ITS CONTENTS, AND THAT HE/SHE HEREBY EXECUTES THE SAME AND MAKES THIS AGREEMENT AND THE RELEASE AND AGREEMENTS PROVIDED FOR HEREIN VOLUNTARILY AND OF HIS/HER OWN FREE WILL.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates set forth below.


“COMPANY”


By:

Its:

Dated:


“EMPLOYEE”




Dated:

Exhibit B- Proprietary Information and Inventions Agreement

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Rule 13a-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Henry Ji, 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;

The registrant’s other certifying officer(s) 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(s) 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.

/s/ Henry Ji, Ph.D.

Henry Ji, Ph.D.

Chairman of the Board of Directors, Chief Executive Officer and President

(Principal Executive Officer)

Dated: November 6, 2020

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Rule 13a-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Najjam Asghar, 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;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer(s) 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)

(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.

/s/ Najjam Asghar

Najjam Asghar

Chief Financial Officer

(Principal Financial Officer)

Dated: November 6, 2020

Exhibit 32.1

CERTIFICATIONS OF

PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

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

I, Henry Ji, 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 September 30, 2020 (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.

Date:	November 6, 2020	By:	/s/ Henry Ji, Ph.D.
			Henry Ji, Ph.D.
			Chairman of the Board of Directors, Chief Executive Officer and President
			(Principal Executive Officer)

I, Najjam Asghar, principal financial 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.

Date:	November 6, 2020	By:	/s/ Najjam Asghar
			Najjam Asghar
			Chief Financial Officer
			(Principal Financial Officer)

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.