Filed Pursuant to Rule 424(b)(5)
Registration No. 333-221443
PROSPECTUS SUPPLEMENT
(To Prospectus dated December 6, 2017)
Up to $75,000,000 of Shares of Common
Stock
plus 897,308 Commitment Shares
Pursuant
to this prospectus supplement and the accompanying prospectus, we are offering up to $75.0 million in the aggregate amount,
or the Purchase Shares, plus an additional 897,308 shares, or the Commitment Shares, of our common stock, par value $0.0001 per
share, to Aspire Capital Fund, LLC, an Illinois limited liability company, or Aspire Capital, under a Common Stock Purchase Agreement
entered into on February 10, 2020, or the Purchase Agreement.
The
shares offered include (i) 897,308 Commitment Shares to be issued to Aspire Capital in consideration for entering into the Purchase
Agreement, (ii) 2,991,027 Purchase Shares to be issued to Aspire Capital for an aggregate sale price of $7.5 million, or the
Initial Purchase Shares, and (iii) additional Purchase Shares with an aggregate offering price of up to $67.5 million
which may be sold from time to time to Aspire Capital over the 24-month term of the Purchase Agreement. The purchase
price for the Purchase Shares, other than the Initial Purchase Shares, will be based upon one of two formulas set forth in the
Purchase Agreement depending on the type of purchase notice we submit to Aspire Capital from time to time. See “The Aspire
Transaction” beginning on page S-17 of this prospectus supplement for more details
on how the price for sales of the Purchase Shares (excluding the Initial Purchase Shares) will be determined.
Our common stock is
listed on the Nasdaq Capital Market under the symbol “SRNE.” On February 10,
2020, the last reported sale price of our common stock on the Nasdaq Capital Market was $2.95 per share.
Investing in our
securities involves a high degree of risk. See “Risk Factors” beginning on page S-7 of this prospectus supplement and
under similar headings in the documents incorporated by reference into this prospectus supplement for a discussion of certain risks
you should consider before investing in our securities.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this
prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is February 10, 2020.
TABLE OF CONTENTS
ABOUT THIS PROSPECTUS SUPPLEMENT
This prospectus supplement
and the accompanying base prospectus are part of a “shelf” registration statement on Form S-3 that we filed with the
U.S. Securities and Exchange Commission, or the SEC, using a “shelf” registration process. This prospectus supplement
describes the specific terms of this offering. The accompanying base prospectus, including the documents incorporated by reference
therein, provides general information about us, some of which, such as the section therein entitled “Plan of Distribution,”
may not apply to this offering. Generally, when we refer to this prospectus, we are referring to both this prospectus supplement
and the accompanying base prospectus, combined.
We urge you to carefully
read this prospectus supplement, the accompanying base prospectus, the documents incorporated by reference herein and therein and
the additional information under the heading “Information Incorporated by Reference; Where You Can Find More Information”
before buying any of the securities being offered under this prospectus supplement. These documents contain information you should
consider when making your investment decision.
You should rely only
on the information contained or incorporated by reference in this prospectus supplement and the accompanying base prospectus. We
have not authorized anyone to provide you with different information. If anyone provides you with different or inconsistent information,
you should not rely on it. This prospectus supplement may add, update or change information contained in the accompanying base
prospectus. To the extent any information in this prospectus supplement is inconsistent with the accompanying base prospectus,
you should rely on the information in this prospectus supplement. The information in this prospectus supplement will be deemed
to modify or supersede the information in the accompanying base prospectus and the documents incorporated by reference therein,
except for those documents incorporated by reference therein which we file with the SEC after the date of this prospectus supplement.
You should not assume
that the information contained or incorporated by reference in this prospectus supplement and the accompanying base prospectus
is accurate on any date subsequent to the date set forth on the front cover of this prospectus supplement and the accompanying
base prospectus or on any date subsequent to the date of the document incorporated by reference herein or therein, as applicable.
Our business, financial condition, results of operations and prospects may have changed since those dates.
We are offering to
sell, and seeking offers to buy, the securities described in this prospectus supplement only in jurisdictions where offers and
sales are permitted. The distribution of this prospectus supplement and the offering of the securities in certain jurisdictions
may be restricted by law. Persons outside the United States who come into possession of this prospectus supplement must inform
themselves about, and observe any restrictions relating to, the offering of the securities and the distribution of this prospectus
supplement outside the United States. This prospectus supplement does not constitute, and may not be used in connection with, an
offer to sell, or a solicitation of an offer to buy, any securities offered by this prospectus supplement by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
We further note that
the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to any document that is incorporated
by reference into this prospectus supplement or the accompanying base prospectus were made solely for the benefit of the parties
to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should
not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were
accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as
accurately representing the current state of our affairs.
In this prospectus
supplement, unless otherwise indicated or required by the context, the terms “Sorrento,” “we,” “our,”
“us” and the “Company” refer to Sorrento Therapeutics, Inc. and its consolidated subsidiaries.
PROSPECTUS SUPPLEMENT SUMMARY
This summary contains
basic information about us and this offering. This summary highlights selected information contained elsewhere in, or incorporated
by reference into, this prospectus supplement. This summary is not complete and may not contain all of the information that is
important to you and that you should consider before making an investment decision. For a more complete understanding of Sorrento
and this offering, you should carefully read this prospectus supplement, including any information incorporated by reference into
this prospectus supplement, in its entirety. Investing in our securities involves risks that are described in this prospectus supplement
under the heading “Risk Factors,” under the headings “Item 1A. Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2018 and “Part II, Item 1A” in our
Quarterly Report for the quarter ended March 31, 2019, our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, and our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, and in our other filings with the SEC.
Our Company
Overview
We are a clinical stage
and commercial biopharma company focused on delivering innovative and clinically meaningful therapies to patients and their families,
globally, to address unmet medical needs. We primarily focus on therapeutic areas in Immuno-Oncology and Non-Opioid Pain Management.
We also have programs assessing the use of our technologies and products in autoimmune, inflammatory and neurodegenerative diseases.
At our core, we are
an antibody-centric company and leverage our proprietary G-MAB™ library and targeted delivery modalities to generate the
next generation of cancer therapeutics. Our fully human antibodies include PD-1, PD-L1, CD38, CD123, CD47, c-MET, VEGFR2, CCR2
and CD137 among others.
Our vision is to leverage
these antibodies in conjunction with proprietary targeted delivery modalities to generate the next generation of cancer therapeutics.
These modalities include proprietary chimeric antigen receptor T-cell therapy, or CAR-T, dimeric antigen receptor T-cell therapy,
or DAR-T, antibody drug conjugates, or ADCs, as well as bispecific antibody approaches. Additionally, we acquired Sofusa®,
a revolutionary drug delivery system, in July 2018, which delivers biologics directly into the lymphatic system to potentially
achieve improved efficacy and fewer adverse effects than standard parenteral immunotherapy.
With each of our clinical
and pre-clinical programs, we aim to tailor our therapies to treat specific stages in the evolution of cancer, from elimination,
to equilibrium and escape. In addition, our objective is to focus on tumors that are resistant to current treatments and where
we can design focused trials based on a genetic signature or biomarker to ensure patients have the best chance of a durable and
significant response. We have several immuno-oncology programs that are in or close to entering the clinic. These include cellular
therapies, an oncolytic virus and a palliative care program targeted to treat intractable cancer pain. Our cellular therapy programs
focus on CAR-T for adoptive cellular immunotherapy to treat both solid and liquid tumors. We have reported early data from Phase
I trials of our carcinoembryonic antigen, or CEA, -directed CAR-T program. We have treated five patients with stage 4, unresectable
adenocarcinoma (four with pancreatic and one with colorectal cancer) and CEA-positive liver metastases with anti-CEA CAR-T and
are currently expanding this study. We successfully submitted an Investigational New Drug application, or IND, for anti-CD38 CAR-T
(autologous) for the treatment of refractory or relapsed multiple myeloma and obtained approval from the U.S. Food and Drug Administration,
or the FDA, to commence a human clinical trial for this indication in early 2018. We have dosed five patients for the Phase I clinical
trial and are continuing the enrollment of additional patients. The data-readout for this Phase I clinical trial is expected during
the first quarter of 2020. We expect to file an IND for CD38 ADC in the second half of 2020 and an IND for CD38/CD3 bispecific
antibody (BsAb) in the second half of 2020.
Broadly speaking, we
are one of the world’s leading CAR-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 CAR-T solutions.
With “off-the-shelf” solutions, CAR-T therapy can truly become a drug product rather than a treatment procedure. One
of the approaches we have taken to develop the “off-the-shelf” allogeneic CAR-T solutions is through Celularity, Inc.,
or Celularity, our joint venture with Celgene, United Therapeutics and others. Celularity focuses on developing cell therapies
with placenta-derived and cord blood T cells, which have natural allogeneic “off-the-shelf” characteristics.
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, or RTX, which is a non-opioid-based neurotoxin that specifically
ablates nerves that conduct pain signals while leaving other nerve functions intact and is being studied for chronic pain treatment.
RTX has been granted orphan drug status for the treatment of intractable pain with end-stage cancer. A Phase I trial with the National
Institutes of Health for intrathecal administration and a Phase I trial for epidural administration are both expected to conclude
in 2020. A Phase Ib trial studying tolerance and efficacy of RTX for the control of osteoarthritis knee pain was initiated in late
2018 and preliminary results have shown strong efficacy with no significant adverse effects. The Phase Ib trial is expected to
conclude in 2020 and one Phase III pivotal trial in the U.S. and Asia-Pacific is expected to commence in the first half of 2020.
Also in the area of
non-opioid pain management, we have acquired proprietary technologies to responsibly develop next generation, branded pharmaceutical
products to better manage patients’ medical conditions and maximize the quality of life of patients and healthcare providers.
The flagship product of our majority-owned subsidiary, Scilex Holding Company, or Scilex Holding, ZTlido® (lidocaine topical
system) 1.8%, is a next-generation lidocaine delivery system which was approved by the FDA for the treatment of pain associated
with postherpetic neuralgia, a severe neuropathic pain condition, in February 2018, and was commercially launched in late October
2018. Scilex Holding now has built a full commercial organization, which includes sales, marketing, market access and medical affairs.
ZTlido® has demonstrated superior adhesion in head-to-head studies as compared to Lidoderm and is manufactured by our Japanese
partner in their state-of-the-art manufacturing facility. We expect to commence a Phase II clinical trial for ZTlido® (lidocaine
topical system) 5.4%, or SP-103, for chronic low back pain in the first half of 2020.
Scilex Holding’s
other lead compound, SP-102, has been awarded fast track designation by the FDA. It is the first non-opioid corticosteroid formulated
as a viscous gel injection in development for the treatment of lumbar radicular pain/sciatica, containing no neurotoxic preservatives,
surfactants, solvents or particulates. The FDA’s fast track program was implemented to expedite the development and regulatory
review of therapeutic programs that seek to address significant unmet medical needs. SP-102 is currently in a pivotal trial, “Corticosteroid
Lumbar Epidural Analgesia for Radiculopathy (C.L.E.A.R.).” The CLEAR trial is a randomized, double-blind, placebo-controlled
Phase III trial that is expected to enroll 400 patients with lumbar radicular pain at 40+ sites across the U.S. The primary endpoint
is mean change in the Numerical Pain Rating Scale for leg pain in patients receiving SP-102 compared to intramuscular injection
of placebo over four weeks. The secondary endpoints include other measures of pain at 4 and 12 weeks as well as time to repeat
injection of SP-102, safety and function. The trial includes an open-label extension to build the safety database of patients treated
with SP-102. Topline pivotal data for the Phase III trial is expected during the second half of 2020.
For a complete description
of our business, financial condition, results of operations and other important information, we refer you to our filings with the
SEC that are incorporated by reference in this prospectus supplement, including our Annual Report on Form 10-K for the year ended December 31, 2018, as amended, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2019 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019. For instructions on how to find copies of these documents, see
“Information Incorporated by Reference; Where You Can Find More Information”.
See the section entitled
“Risk Factors” in this prospectus supplement for a discussion of some of the risks relating to the execution of our
business strategy.
Recent Developments
Equity
Distribution Agreement
On
October 1, 2019, we entered into an Equity Distribution Agreement, or the Distribution Agreement,
with JMP Securities LLC, as sales agent, or the Agent, pursuant to which we could offer and sell, from time to time, through or
to the Agent, as sales agent or principal, up to $75,000,000 in shares of our common stock. On February 10, 2020, we voluntarily
suspended the offering under the Distribution Agreement, effective immediately. During the term of the Distribution Agreement,
we sold an aggregate of 2,120,149 shares of our common stock thereunder for aggregate net proceeds to
us of approximately $7.4 million.
Acquisition
Proposal
On January 10, 2020,
we announced that on January 9, 2020, we received a non-binding proposal from a private equity fund to acquire a majority or all
of our issued and outstanding shares for up to $7.00 per share. On January 27, 2020, we announced that, after reviewing the acquisition
proposal in consultation with its advisors, our Board of Directors determined that the offer significantly undervalues our company
and is not in the best interest of our stockholders. Accordingly, our Board of Directors unanimously rejected the acquisition proposal.
Corporate Information
On September 21, 2009,
QuikByte Software, Inc., a Colorado corporation and shell company, or QuikByte, consummated its acquisition of Sorrento Therapeutics,
Inc., a Delaware corporation and private concern, or STI, in a reverse merger, or the Merger. Pursuant to the Merger, all of the
issued and outstanding shares of STI common stock were converted into an aggregate of 6,775,032 shares of QuikByte common stock
and STI became a wholly owned subsidiary of QuikByte. The holders of QuikByte’s common stock immediately prior to the Merger
held an aggregate of 2,228,333 shares of QuikByte’s common stock immediately following the Merger.
We were originally
incorporated as San Diego Antibody Company in California in 2006 and were renamed “Sorrento Therapeutics, Inc.” and
reincorporated in Delaware in 2009, prior to the Merger. QuikByte was originally incorporated in Colorado in 1989. Following the
Merger, on December 4, 2009, QuikByte reincorporated under the laws of the State of Delaware, or the Reincorporation. Immediately
following the Reincorporation, on December 4, 2009, we merged with and into QuikByte, the separate corporate existence of STI ceased
and QuikByte continued as the surviving corporation, or the Roll-Up Merger. Pursuant to the certificate of merger filed in connection
with the Roll-Up Merger, QuikByte’s name was changed from “QuikByte Software, Inc.” to “Sorrento Therapeutics,
Inc.”
The Offering
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Common stock offered by us
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Up to $67.5 million of Purchase Shares that we may sell to Aspire Capital from time to time over the next 24 months, at our sole discretion, in accordance with the Purchase Agreement, plus (i) 897,308 Commitment Shares issued to Aspire Capital as consideration for its commitment to purchase shares of our common stock under the Purchase Agreement and (ii) 2,991,027 Initial Purchase Shares issued to Aspire Capital for an aggregate sale price of $7.5 million. We will not receive any cash proceeds from the issuance of the Commitment Shares.
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Common stock outstanding before this offering
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174,788,066
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Common stock to be outstanding immediately after this offering
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Up to 201,557,756 shares, assuming the issuance of 897,308 Commitment Shares, 2,991,027 Initial Purchase Shares and sales of $67.5 million of additional Purchase Shares at an assumed price of $2.95 per share, which was the closing price of our common stock on the Nasdaq Capital Market on February 10, 2020. The actual number of Purchase Shares issued will vary depending on the sales prices under this offering, but will not be greater than 34,942,678, which number includes the 897,308 Commitment Shares, the 2,991,027 Initial Purchase Shares and up to $67.5 million of additional Purchase Shares, in the aggregate representing 19.99% of the shares of our common stock outstanding on the date of the Purchase Agreement, unless such sales are made in accordance with applicable rules of The Nasdaq Stock Market LLC.
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Manner of offering
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Issuance of 897,308 Commitment Shares to Aspire Capital in consideration for entering into the Purchase Agreement, 2,991,027 Initial Purchase Shares to Aspire Capital for an aggregate sale price of $7.5 million, and additional Purchase Shares to Aspire Capital from time to time, subject to certain minimum stock price requirements, and daily and other caps, for an aggregate offering price of up to $75.0 million (including the Initial Purchase Shares). See “The Aspire Transaction” and “Plan of Distribution.”
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Use of proceeds
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Any proceeds from Aspire Capital that we receive under the Purchase Agreement are expected be used for working capital and general corporate purposes. See “Use of Proceeds” beginning on page S-13 of this prospectus supplement for additional detail.
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Trading symbol
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Our common stock is listed on the Nasdaq Capital Market under the symbol “SRNE.”
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Risk factors
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Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page S-7 of this prospectus supplement and other information included or incorporated in this prospectus supplement for a discussion of factors you should carefully consider before investing in our securities.
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The number of shares
of our common stock to be outstanding immediately after this offering is based on 131,001,293 shares of our common stock issued
and outstanding as of September 30, 2019, and:
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·
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excludes 12,322,326 shares of our common stock issuable upon the exercise of stock options outstanding
under our Amended and Restated 2009 Stock Incentive Plan as of September 30, 2019, at a weighted-average exercise price of $4.70
per share;
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·
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excludes 10,000,000 shares of our common stock reserved for issuance under our 2019
Stock Incentive Plan as of September 30, 2019;
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·
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excludes 47,814,803 shares of our common stock issuable upon exercise of outstanding warrants as
of September 30, 2019 at a weighted average exercise price of $3.26 per share;
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·
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gives effect to the issuance of 10,869,566
shares of our common stock and related warrants to purchase up to 10,869,566 shares of our common stock with an exercise price
of $2.40 per share issued pursuant to a registered direct offering on October 9, 2019 (assuming no exercises of such warrants);
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·
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gives effect to the conversion of convertible promissory notes in an aggregate principal amount
of $37,848,750 outstanding as of September 30, 2019 into an aggregate of 22,660,449 shares of our common stock on November 8, 2019;
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·
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gives effect to the issuance of an aggregate of 8,136,609 shares of our common stock upon exercise
of warrants to purchase shares of our common stock between November 2019 to January 2020; and
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·
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gives effect to the issuance of an aggregate of 2,120,149 shares of our common stock pursuant to
the Distribution Agreement between November 2019 to February 2020.
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RISK FACTORS
Our
Annual Report on Form 10-K for the year ended December 31, 2018, our
Quarterly Report for the quarter ended March 31, 2019, our
Quarterly Report for the quarter ended June 30, 2019 and our
Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, which are incorporated by reference into this prospectus
supplement, as well as our other filings with the SEC, include material risk factors relating to our business. Those risks and
uncertainties and the risks and uncertainties described below are not the only risks and uncertainties that we face. Additional
risks and uncertainties that are not presently known to us or that we currently deem immaterial or that are not specific to us,
such as general economic conditions, may also materially and adversely affect our business and operations. If any of those risks
and uncertainties or the risks and uncertainties described below actually occurs, our business, financial condition or results
of operations could be harmed substantially. In such a case, you may lose all or part of your investment. You should carefully
consider the risks and uncertainties described below and those risks and uncertainties incorporated by reference into this prospectus
supplement, as well as the other information included in this prospectus supplement, before making an investment decision with
respect to our securities.
Risks Related to this Offering and Ownership
of our Common Stock
Sales
of our common stock to Aspire Capital may cause substantial dilution to our existing stockholders and the sale of the shares of
our common stock acquired by Aspire Capital could cause the price of our common stock to decline.
This prospectus supplement relates
to the 897,308 Commitment Shares and an aggregate amount of up to $75.0 million of Purchase Shares that we
may issue and sell to Aspire Capital from time to time pursuant to the Purchase Agreement, including the Initial Purchase Shares.
It is anticipated that shares offered to Aspire Capital in this offering will be sold over a period of up to 24 months
from the date of the Purchase Agreement. The number of shares ultimately offered for sale to Aspire Capital under this prospectus
supplement is dependent upon the number of shares we elect to sell to Aspire Capital under the Purchase Agreement. Depending upon
market liquidity at the time, sales of shares of our common stock under the Purchase Agreement may cause the trading price of our
common stock to decline.
Aspire Capital may ultimately purchase
all, some or none of the Purchase Shares remaining after the sale of the 2,991,027 Initial Purchase Shares. After Aspire Capital
has acquired shares under the Purchase Agreement, it may sell all, some or none of those shares. Sales to Aspire Capital by us
pursuant to the Purchase Agreement under this prospectus supplement may result in substantial dilution to the interests of other
holders of our common stock. The sale of a substantial number of shares of our common stock to Aspire Capital in this offering,
or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at
a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount
of any sales of our shares to Aspire Capital and the Purchase Agreement may be terminated by us at any time at our discretion without
any cost to us.
We have a right to sell up to 500,000
Purchase Shares per day for up to $2,000,000 of the Common Stock in the aggregate (unless otherwise mutually agreed by us and Aspire
Capital) under our Purchase Agreement with Aspire Capital, which total number of shares may be increased by mutual agreement up
to an additional 4,000,000 Purchase Shares per day. In addition, on any date on which we submit a purchase notice to
Aspire Capital for at least 500,000 Purchase Shares, we also have the right, in our sole discretion, to present Aspire Capital
with a volume-weighted average price purchase notice directing Aspire Capital to purchase an additional amount of our common stock
equal to up to 30% of the aggregate shares of common stock traded on the next business day subject to a maximum number of shares
determined by us. The extent to which we rely on Aspire Capital as a source of funding will depend on a number of factors, including
the prevailing market price of our common stock and the extent to which we are able to secure working capital from other sources.
The aggregate number of shares that we can sell to Aspire Capital under the Purchase Agreement may in no case exceed 34,942,678
shares of our common stock (which is equal to approximately 19.99% of the common stock outstanding on the date of the Purchase
Agreement), including the 897,308 Commitment Shares and the 2,991,027 Initial Purchase Shares, or the Exchange Cap,
unless stockholder approval is obtained to issue more or such sales otherwise would comply with the listing rules of The Nasdaq
Stock Market, LLC, in which case the Exchange Cap will not apply.
Future sales of our common stock,
or the perception that such future sales may occur, may cause our stock price to decline.
Sales
of a substantial number of our shares of common stock in the public markets, or the perception that such sales could occur, could
depress the market price of our shares of common stock and impair our ability to raise capital through the sale of additional equity
securities. A substantial number of shares of common stock are being offered by this prospectus supplement, and we cannot predict
if and when Aspire Capital may sell such shares in the public markets. We cannot predict the number of these shares that might
be sold nor the effect that future sales of our shares of common stock would have on the market price of our shares of common stock.
We have broad discretion to determine
how to use the funds raised in this offering, and may use them in ways that may not enhance our operating results or the price
of our common stock.
Our management will have broad discretion
over the use of proceeds from this offering, and we could spend the proceeds from this offering in ways our stockholders may not
agree with or that do not yield a favorable return, if at all. We intend to use the net proceeds from this offering for working
capital and general corporate purposes. See “Use of Proceeds” beginning on page S-13 of this prospectus supplement
for additional detail. However, our use of these proceeds may differ substantially from our current plans. If we do not invest
or apply the proceeds from this offering in ways that improve our operating results, we may fail to achieve expected financial
results, which could cause our stock price to decline.
Terms of subsequent financings may
adversely impact our stockholders.
To finance our future business plans and
working capital needs, we will have to raise funds through the issuance of equity or debt securities in addition to sales in this
offering. Depending on the type and the terms of any financing we pursue, stockholders’ rights and the value of their investment
in our common stock could be reduced. A financing could involve one or more types of securities including common stock, convertible
debt or warrants to acquire common stock. These securities could be issued at or below the then prevailing market price for our
common stock. In addition, if we issue secured debt securities, the holders of the debt would have a claim to our assets that would
be senior to the rights of stockholders until the debt is paid. Interest on these debt securities would increase costs and negatively
impact operating results. If the issuance of new securities results in diminished rights to holders of our common stock, the market
price of our common stock could be negatively impacted.
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. Under our loan agreement,
or the Loan Agreement, with certain funds and accounts managed by Oaktree Capital Management, L.P., or collectively, the Lenders,
and Oaktree Fund Administration, LLC, as administrative and collateral agent, we are prohibited from paying any dividends without
the prior written consent of the Lenders. 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.
Our Amended and Restated Bylaws provide
that the Court of Chancery in the State of Delaware is the sole and exclusive forum for substantially all disputes between us and
our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or
our directors, officers or employees.
Our Amended and Restated Bylaws, or our
Bylaws, provide that, unless our Board of Directors consents to an alternative forum, the Court of Chancery in the State of Delaware
will be the sole and exclusive forum for: (i) any derivative action or proceeding brought by or on our behalf; (ii) any direct
action asserting a claim against us or any of our directors or officers pursuant to any of the provisions of the General Corporation
Law of the State of Delaware, our Restated Certificate of Incorporation or our Bylaws; (iii) any action asserting a claim of breach
of fiduciary duties owed by any of our directors, officers or other employees to our stockholders; or (iv) any action asserting
a violation of Delaware decisional law relating to our internal affairs. This provision does not apply to (a) actions in which
the Court of Chancery in the State of Delaware concludes that an indispensable party is not subject to the jurisdiction of Delaware
courts, or (b) actions in which a federal court has assumed exclusive jurisdiction to a proceeding. This choice of forum provision
is not intended to apply to any actions brought under the Securities Act of 1933, as amended, or the Securities Act, or the Securities
Exchange Act of 1934, as amended, or the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over
all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result,
the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any
other claim for which the federal courts have exclusive jurisdiction. However, our Bylaws do not relieve us of our duties to comply
with federal securities laws and the rules and regulations thereunder, and our stockholders will not be deemed to have waived our
compliance with these laws, rules and regulations. Our Bylaws also provide that any person or entity purchasing or otherwise acquiring
any interest in shares of our capital stock will be deemed to have notice of and consented to this choice of forum provision.
This choice of forum provision in our Bylaws
may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our
directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees.
In addition, stockholders who do bring a claim in the Court of Chancery in the State of Delaware could face additional litigation
costs in pursuing any such claim, particularly if they do not reside in or near Delaware. Furthermore, the enforceability of similar
choice of forum provisions in other companies’ governing documents has been challenged in legal proceedings, and it is possible
that a court could find these types of provisions to be inapplicable or unenforceable. If a court were to find the choice of forum
provision in our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving
such action in other jurisdictions, which could adversely affect our business and financial condition.
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus supplement
and the documents incorporated herein by reference contain “forward-looking statements” by us within the meaning of
Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of
1934, as amended, or the Exchange Act, including, without limitation, statements as to expectations, beliefs and strategies regarding
the future. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual
results, performance or achievements to be materially different from any future results, performance or achievements expressed
or implied by the forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future
events and include statements relating to:
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risks and uncertainties associated with our research and development activities, including our
clinical trials and preclinical studies;
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the timing or likelihood of regulatory filings and approvals or of alternative regulatory pathways
for our drug candidates;
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the potential market opportunities for commercializing our product candidates;
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our expectations regarding the potential market size and the size of the patient populations for
our product candidates, if approved for commercial use, and our ability to serve such markets;
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estimates of our expenses, future revenue, capital requirements and our needs for additional financing;
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our ability to continue as a going concern;
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our ability to develop, acquire and advance our product candidates into, and successfully complete,
clinical trials and preclinical studies and obtain regulatory approvals;
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the implementation of our business model and strategic plans for our business and product candidates;
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the initiation, cost, timing, progress and results of future and current preclinical studies and
clinical trials, and our research and development programs;
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the terms of future licensing arrangements, and whether we can enter into such arrangements at
all;
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timing and receipt or payments of licensing and milestone revenues, if any;
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the scope of protection we are able to establish and maintain for intellectual property rights
covering our product candidates and our ability to operate our business without infringing the intellectual property rights of
others;
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regulatory developments in the United States and foreign countries;
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the performance of our third party suppliers and manufacturers;
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our ability to maintain and establish collaborations or obtain additional funding;
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the success of competing therapies that are currently or may become available;
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our use of proceeds from this offering;
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our ability to integrate acquired businesses and assets with our operations, technologies, services,
and personnel;
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our planned acquisitions, the terms of any such acquisitions and the expected timing for completing
such acquisitions;
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our financial performance; and
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developments and projections relating to our competitors and our industry.
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Any forward-looking
statements should be considered in light of these factors. Words such as “anticipates,” “believes,” “forecasts,”
“potential,” “goal,” “contemplates,” “expects,” “intends,” “plans,”
“projects,” “hopes,” “seeks,” “estimates,” “strategy,” “continues,”
“ongoing,” “opportunity,” “could,” “would,” “should,” “likely,”
“will,” “may,” “can,” “designed to,” “future,” “foreseeable future”
and similar expressions and variations, and negatives of these words, identify forward-looking statements. These forward-looking
statements are based on the expectations, estimates, projections, beliefs and assumptions of our management based on information
currently available to management, all of which are subject to change. These forward-looking statements are not guarantees of future
performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated
by the forward-looking statements. Many of the important factors that will determine these results and values are beyond our ability
to control or predict. You are cautioned not to put undue reliance on any forward-looking statements. Except as otherwise required
by law, we do not assume any obligation to update any forward-looking statements.
In evaluating an investment
in shares of our common stock, you should carefully consider the discussion of risks and uncertainties described under the heading
“Risk Factors” contained in this prospectus supplement, and under similar headings in other documents, including in
our Annual Report on Form 10-K
for the fiscal year ended December 31, 2018, our
Quarterly Report for the quarter ended March 31, 2019, our Quarterly Report for the quarter ended June 30, 2019 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 and in other filings with the SEC, which may be amended,
supplemented or superseded from time to time by other reports we file with the SEC in the future, that are incorporated by reference
in this prospectus supplement. You should carefully read this prospectus supplement together with the information incorporated
by reference in this prospectus supplement as described under the heading “Information Incorporated by Reference; Where You
Can Find More Information” completely and with the understanding that our actual future results may be materially different
from what we expect.
All subsequent written
and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety
by our cautionary statements. The forward-looking statements included or incorporated by reference herein are made only as of the
date of this prospectus supplement (or as of the date of any such document incorporated by reference). We do not intend, and undertake
no obligation, to update these forward-looking statements, except as required by law.
MARKET AND INDUSTRY
DATA
Unless otherwise indicated,
we have based the information concerning our industry contained in this prospectus supplement and incorporated by reference herein
on our general knowledge of and expectations concerning the industry, which involve risks and uncertainties and are subject to
change based on various factors, including those discussed in the “Risk Factors” section of this prospectus supplement
and in the other information contained or incorporated by reference in this prospectus supplement. These and other factors could
cause the information concerning our industry to differ materially from those expressed in this prospectus supplement and incorporated
by reference herein.
USE OF PROCEEDS
We
may receive up to $67.5 million in aggregate gross proceeds under the Purchase Agreement from sales of Purchase Shares we may make
to Aspire Capital after the date of this prospectus supplement, excluding the $7.5 million in gross proceeds we received pursuant
to the issuance and sale of the Initial Purchase Shares. We may sell fewer than all of the shares offered by this prospectus supplement,
in which case our net offering proceeds will be less. Because we are not obligated to sell any shares of our common stock under
the Purchase Agreement, other than the Commitment Shares, for which we will receive no cash consideration, and the Initial Purchase
Shares, the actual total offering amount and proceeds to us, if any, are not determinable at this time. Other than the proceeds
we will receive for the sale of the Initial Purchase Shares, there can be no assurance that we will receive any proceeds under
or fully utilize the Purchase Agreement. See “Plan of Distribution” elsewhere in this prospectus supplement for more
information.
We
will retain broad discretion over the use of the net proceeds from this offering. We currently intend to use the net proceeds of
this offering for working capital and general corporate purposes. Pending application
of the net proceeds as described above, we intend to temporarily invest the net proceeds in short-term, interest-bearing instruments.
DIVIDEND POLICY
We have never declared
or 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. Under the Loan Agreement, we are prohibited
from paying any dividends without the prior written consent of the Lenders. 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.
DILUTION
The
sale of our common stock to Aspire Capital pursuant to the Purchase Agreement will have a dilutive impact on our stockholders.
In addition, the lower our stock price is at the time we exercise our right to sell shares of common stock to Aspire Capital, the
more shares of our common stock we will have to issue to Aspire Capital pursuant to the Purchase Agreement and our existing stockholders
would experience greater dilution.
Our net tangible book
value as of September 30, 2019 was approximately $(95.9) million, or $(0.73) per share of common stock. Net tangible book value
per share is determined by dividing the net of total tangible assets less total liabilities, by the aggregate number of shares
of common stock outstanding as of September 30, 2019.
Our pro forma net
tangible book value as of September 30, 2019 was approximately $(17.1) million, or $(0.10) per share of common stock. Pro forma
net tangible book value per share is determined by dividing the net of total tangible assets less total liabilities, by the aggregate
number of shares of common stock outstanding as of September 30, 2019, after giving effect to: (1) the issuance of 10,869,566 shares
of our common stock and warrants to purchase up to 10,869,566 shares of our common stock (assuming no value is attributed to the
warrants, and such warrants are accounted for and classified as equity) pursuant
to a registered direct offering that closed on October 9, 2019 for net proceeds to us of approximately $23.4 million, after
deducting the placement agent’s fees and other estimated offering expenses, (2) the conversion of convertible promissory
notes in an aggregate principal amount of $37,848,750 into an aggregate of 22,660,449 shares of our common stock on November 8,
2019, (3) the issuance of an aggregate of 8,136,609 shares of our common stock upon exercise of warrants to purchase shares of
our common stock between November 2019 to January 2020 for net proceeds to us of approximately $21.9 million, and (4) the issuance
of an aggregate of 2,120,149 shares of our common stock pursuant to the Distribution Agreement that were sold between November
2019 to February 2020 for net proceeds to us of approximately $7.4 million.
After
giving effect to the sale of the 897,308 Commitment Shares, the 2,991,027 Initial
Purchase Shares and the sale of up to $67.5 million of additional Purchase Shares (without giving effect to the Exchange Cap)
at an assumed offering price of $2.95 per share, the last reported sale price of our common stock on the Nasdaq Capital Market
on February 10, 2020, our pro forma as adjusted net tangible book value as of September 30, 2019 would have been approximately
$57.9 million, or $0.29 per share of common stock. This represents an immediate increase
in the pro forma net tangible book value of $0.39 per share to our existing stockholders
and an immediate and substantial dilution in net tangible book value of $2.66 per
share to Aspire Capital. The following table illustrates this per share dilution:
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Assumed offering price per share
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$
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2.95
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Net tangible book value per share as of September 30, 2019
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$
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(0.73
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Increase in net tangible book value per share attributable to the October Registered Offering on October 9, 2019, the conversion of the Convertible Notes on November 8, 2019, warrant exercises between November 2019 to January 2020 and the sale of shares pursuant to the Distribution Agreement between November 2019 to February 2020
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$
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0.63
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Pro forma net tangible book value per share as of September 30, 2019
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$
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(0.10
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Increase in pro forma net tangible book value per share attributable to Aspire Capital
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$
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0.39
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Pro forma as adjusted net tangible book value per share after this offering
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$
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0.29
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Net dilution per share to Aspire Capital
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$
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2.66
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The above table excludes:
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12,322,326 shares of our common stock issuable upon the exercise of stock options outstanding under
our Amended and Restated 2009 Stock Incentive Plan as of September 30, 2019, at a weighted-average exercise price of $4.70
per share;
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10,000,000 shares of our common stock reserved for issuance under our 2019
Stock Incentive Plan as of September 30, 2019; and
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47,814,803 shares of our common stock issuable upon exercise of outstanding warrants as of September
30, 2019 at a weighted average exercise price of $3.26 per share.
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To the extent that
any outstanding options or warrants are exercised, new options or other equity awards are issued under our equity incentive plans,
or we issue additional shares of common stock or other equity or convertible debt securities in the future, there may be further
dilution to investors participating in this offering. Moreover, we may choose to raise additional capital because of market conditions
or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we
raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result
in further dilution to our stockholders.
The
Aspire Transaction
General
On February 10, 2020,
we entered into the Purchase Agreement with Aspire Capital, which provides that, upon the terms and subject to the conditions and
limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $67.5 million of Purchase Shares
(excluding the Initial Purchase Shares) from time to time over the 24-month term of the Purchase Agreement. As consideration for
entering into the Purchase Agreement, we issued to Aspire Capital 897,308 Commitment Shares. In addition, on February 10, 2020,
Aspire Capital purchased 2,991,027 Initial Purchase Shares at a purchase price of $2.5075 per share for an aggregate purchase price
of $7.5 million, pursuant to the Purchase Agreement.
We are filing this
prospectus supplement with regard to the offering of our common stock consisting of (i) the Commitment Shares, (ii) the
Initial Purchase Shares and (iii) additional Purchase Shares in an aggregate amount of up to $67.5 million that we may
sell to Aspire Capital pursuant to the Purchase Agreement.
Purchase of Shares under the Purchase
Agreement
On February 10, 2020,
the conditions necessary for purchases under the Purchase Agreement to commence were satisfied. On any business day over the
24-month term of the Purchase Agreement, we have the right, in our sole discretion, to present Aspire Capital with a purchase notice,
each, a Purchase Notice, directing Aspire Capital to purchase up to 500,000 Purchase Shares per business day, provided that Aspire
Capital will not be required to buy Purchase Shares pursuant to a Purchase Notice that was received by Aspire Capital on any business
day on which the last closing trade price of our common stock on the Nasdaq Capital Market (or alternative national exchange in
accordance with the Purchase Agreement) is below $1.00 (which price shall not be adjusted for any stock splits or other similar
transactions), or the Floor Price. We and Aspire Capital also may mutually agree to increase the number of shares that may be sold
to as much as an additional 4,000,000 Purchase Shares per business day. The purchase price per Purchase Share, other than the Initial
Purchase Shares, pursuant to such Purchase Notice, or the Purchase Price is the lower of:
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the
lowest sale price for our common stock on the date of sale; or
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the
average of the three lowest closing sale prices for our common stock during the 10 consecutive business days ending on the business
day immediately preceding the purchase date.
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The applicable Purchase
Price will be determined prior to delivery of any Purchase Notice.
In addition, on any
date on which we submit a Purchase Notice to Aspire Capital for at least 500,000 Purchase Shares, we also have the right, in our
sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice, each, a VWAP Purchase Notice,
directing Aspire Capital to purchase an additional amount of our common stock equal to up to 30% of the aggregate shares of common
stock traded on the next business day, or the VWAP Purchase Date, subject to a maximum number of shares determined by us, or the
VWAP Purchase Share Volume Maximum. The purchase price per Purchase Share pursuant to such VWAP Purchase Notice, or the VWAP Purchase
Price, shall be the lesser of the closing sale price of our common stock on the VWAP Purchase Date or 97% of the volume weighted
average price for our common stock traded on the Nasdaq Capital Market on (i) the VWAP Purchase Date if the aggregate shares
to be purchased on that date does not exceed the VWAP Purchase Share Volume Maximum and the sale price of our common stock has
not fallen below a price equal to (a) 80% of the closing sales price of our common stock on the business day immediately preceding
the VWAP Purchase Date or (b) such higher price as set forth by us in the VWAP Purchase Notice, or the VWAP Minimum Price
Threshold, or (ii) the portion of such business day until such time as the sooner to occur of (x) the time at which the
aggregate shares to be purchased will equal the VWAP Purchase Share Volume Maximum or (y) the time at which the sales price
of our common stock falls below the VWAP Minimum Price Threshold.
The number of Purchase
Shares covered by and timing of each Purchase Notice are determined by us, at our sole discretion. The aggregate number of shares
that we can sell to Aspire Capital under the Purchase Agreement may in no case exceed the Exchange Cap unless (i) stockholder
approval is obtained to issue shares beyond the Exchange Cap, in which case the Exchange Cap will not apply, or (ii) stockholder
approval has not been obtained and at any time the Exchange Cap is reached and at all times thereafter the average price paid for
all shares issued under the Purchase Agreement (including the Commitment Shares) is equal to or greater than a price equal to $2.95,
which was the closing price of our common stock on February 10, 2020; provided that at no time shall Aspire Capital (together with
its affiliates) beneficially own more than 19.99% of our common stock. Other than the Initial Purchase Shares, Aspire Capital has
no right to require any sales by us, but is obligated to make purchases from us as we direct in accordance with the Purchase Agreement.
There are no limitations on use of proceeds, financial or business covenants, restrictions on future financings, rights of first
refusal, participation rights, penalties or liquidated damages in the Purchase Agreement, other than an agreement by us not to
issue securities other than pursuant to the Purchase Agreement for a period of 30 days following the execution of the Purchase
Agreement, subject to certain exceptions. We did not pay any additional amounts to reimburse or otherwise compensate Aspire Capital
in connection with the transaction. The Purchase Agreement may be terminated by us at any time, at our discretion, without any
penalty or cost to us.
Events of Default
Aspire Capital may
terminate the Purchase Agreement upon the occurrence of any of the following events of default, each an Event of Default:
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the
effectiveness of any registration statement that is required to be maintained effective pursuant to the terms of the registration
rights agreement between us and Aspire Capital lapses for any reason (including, without limitation, the issuance of a stop order)
or is unavailable for sale of shares of our common stock in accordance with the terms of the registration rights agreement, and
such lapse or unavailability continues for a period of 10 consecutive business days or for more than an aggregate of 30 business
days in any 365-day period, which is not in connection with a post-effective amendment to any such registration statement or the
filing of a new registration statement; provided, however, that in connection with any post-effective amendment to such registration
statement or filing of a new registration statement that is required to be declared effective by the SEC, such lapse or unavailability
may continue for a period of no more than 30 consecutive business days, which such period shall be extended for an additional
30 business days if the Company receives a comment letter from the SEC in connection therewith;
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the
suspension from trading or failure of our common stock to be listed on our principal market for a period of three consecutive
business days;
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the
delisting of our common stock from our principal market, provided our common stock is not immediately thereafter trading on the
New York Stock Exchange, the NYSE American, the Nasdaq Global Select Market, the Nasdaq Global Market or the Nasdaq Capital Market;
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our
transfer agent’s failure to issue to Aspire Capital shares of our common stock which Aspire Capital is entitled to receive
under the Purchase Agreement within five business days after an applicable purchase date;
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any
breach by us of our representations or warranties (as of the dates made), covenants or other term or condition under the Purchase
Agreement or any related transaction agreements which could have a material adverse effect on us, subject to a cure period of
five business days;
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if
we become insolvent;
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any
participation or threatened participation in insolvency or bankruptcy proceedings by or against us; or
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if
the Exchange Cap is reached unless and until stockholder approval has been obtained.
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So long as an Event
of Default has occurred and is continuing, or if any event which, after notice and/or lapse of time, would become an Event of Default,
has occurred and is continuing, or so long as the closing price of our common stock is below the Floor Price, we may not require
and Aspire Capital has no obligation to purchase any shares of our common stock under the Purchase Agreement.
Aspire Capital may
terminate the Purchase Agreement at any time when an Event of Default exists without any liability or payment to us. However, if
pursuant to or within the meaning of any bankruptcy law, we commences a voluntary case or any person commences a proceeding against
us, a custodian is appointed for us or for all or substantially all of our property, or we makes a general assignment for the benefit
of our creditors (any of which would be an Event of Default), the Purchase Agreement will automatically terminate without any liability
or payment to us without further action or notice.
Our Termination Rights
We may terminate the
Purchase Agreement at any time, in our discretion, without any cost or penalty.
No Short-Selling or Hedging by Aspire
Capital
Aspire Capital has
agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-selling
or hedging of our common stock during any time prior to the termination of the Purchase Agreement.
Effect of Performance of the Purchase
Agreement on Our Stockholders
The Purchase Agreement
does not limit the ability of Aspire Capital to sell any or all of the shares it currently owns or receives in this offering. It
is anticipated that shares sold to Aspire Capital in this offering will be sold to Aspire Capital over a period of up to 24 months
from the date of the Purchase Agreement. The subsequent resale by Aspire Capital of our common stock may cause the market price
of our common stock to decline or to be highly volatile. Aspire Capital may ultimately purchase all, some or none of the shares
of common stock remaining after the 2,991,027 Initial Purchase Shares that, together with the 897,308 Commitment Shares, is the
subject of this prospectus supplement. Aspire Capital may resell all, some or none of the Commitment Shares, Initial Purchase Shares
and any additional Purchase Shares it acquires. Therefore, sales to Aspire Capital by us pursuant to the Purchase Agreement and
this prospectus supplement also may result in substantial dilution to the interests of other holders of our common stock. However,
we have the right to control the timing and amount of any sales of our shares to Aspire Capital and the Purchase Agreement may
be terminated by us at any time at our discretion without any cost to us.
Amount of Potential Proceeds to be Received
under the Purchase Agreement
Under the Purchase
Agreement, we may sell Purchase Shares having an aggregate offering price of up to $75.0 million to Aspire Capital from time
to time, including the Initial Purchase Shares. The number of shares ultimately offered for sale to Aspire Capital in this offering
in addition to the Initial Purchase Shares is dependent upon the number of shares we elect to sell to Aspire Capital under the
Purchase Agreement. In addition, Aspire Capital will not be required to buy Purchase Shares pursuant to a Purchase Notice that
was received by Aspire Capital on any business day on which the last closing trade price of our common stock on the Nasdaq Capital
Market (or alternative national exchange in accordance with the Purchase Agreement) is below the Floor Price. The following table
sets forth the amount of proceeds we would receive from Aspire Capital from the sale of shares at varying purchase prices:
Assumed Average Purchase
Price
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Proceeds from the Sale of Shares
to Aspire Capital Under the
Purchase Agreement Registered in
this Offering
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Number of Shares to be
Issued in this Offering at
the Assumed Average
Purchase Price (1)
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Percentage of
Outstanding Shares After
Giving Effect to the
Purchased Shares Issued
to Aspire Capital (2)
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$
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0.50
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$
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23,027,172
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34,942,678
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16.7
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%
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$
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1.00
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$
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38,554,343
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34,942,678
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16.7
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%
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$
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1.50
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$
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54,081,515
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34,942,678
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16.7
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%
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$
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2.00
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$
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69,608,686
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34,942,678
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16.7
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%
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$
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2.95
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(3)
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$
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75,000,000
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26,769,691
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13.3
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%
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$
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5.00
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$
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75,000,000
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17,388,335
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9.0
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%
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$
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10.00
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$
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75,000,000
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10,638,335
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5.7
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%
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(1)
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Includes the total number of Purchase Shares which we would have sold under the Purchase Agreement
at the corresponding assumed purchase price set forth in the adjacent column, up to an aggregate purchase price of $67.5 million,
plus the 897,308 Commitment Shares and the 2,991,027 Initial Purchase Shares sold at a purchase price of $2.5075 per share, while
giving effect to the Exchange Cap.
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(2)
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The denominator is based on 131,001,293 shares outstanding as of September 30, 2019, adjusted to:
(a) give effect the issuance of 10,869,566 shares of our common stock and
related warrants to purchase up to 10,869,566 shares of our common stock with an exercise price of $2.40 per share issued pursuant
to a registered direct offering on October 9, 2019 (assuming no exercises of such warrants); (b) give effect to the conversion
of convertible promissory notes in an aggregate principal amount of $37,848,750 outstanding as of September 30, 2019 into an aggregate
of 22,660,449 shares of our common stock on November 8, 2019; (c) give effect to the issuance of an aggregate of 8,136,609 shares
of our common stock upon exercise of warrants to purchase shares of our common stock between November 2019 to January 2020; (d)
give effect to the issuance of an aggregate of 2,120,149 shares of our common stock pursuant to the Distribution Agreement between
November 2019 to February 2020; and (e) include the issuance of the number of shares set forth in the adjacent column which we
would have sold to Aspire Capital. The numerator is based on the number of shares which we may issue to Aspire Capital under the
Purchase Agreement (that are the subject of this offering) at the corresponding assumed purchase price set forth in the adjacent
column.
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(3)
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The closing sale price of our common stock on February 10, 2020.
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Information with Respect to Aspire Capital
Aspire Capital Partners
LLC, or Aspire Partners, is the Managing Member of Aspire Capital. SGM Holdings Corp, or SGM, is the Managing Member of Aspire
Partners. Mr. Steven G. Martin is the president and sole shareholder of SGM, as well as a principal of Aspire Partners.
Mr. Erik J. Brown is the president and sole shareholder of Red Cedar Capital Corp, or Red Cedar, which is a principal
of Aspire Partners. Mr. Christos Komissopoulos is president and sole shareholder of Chrisko Investors Inc., or Chrisko, which
is a principal of Aspire Partners. Mr. William F. Blank, III is president and sole shareholder of WML Ventures Corp.,
or WML Ventures, which is a principal of Aspire Partners. Each of Aspire Partners, SGM, Red Cedar, Chrisko, WML Ventures, Mr. Martin,
Mr. Brown, Mr. Komissopoulos and Mr. Blank may be deemed to be a beneficial owner of common stock held by Aspire
Fund. Each of Aspire Partners, SGM, Red Cedar, Chrisko, WML Ventures, Mr. Martin, Mr. Brown, Mr. Komissopoulos and
Mr. Blank disclaims beneficial ownership of the common stock held by Aspire Fund.
PLAN OF DISTRIBUTION
Aspire Capital is
an “underwriter” within the meaning of the Securities Act.
Neither we nor Aspire
Capital can presently estimate the amount of compensation that any agent will receive. We know of no existing arrangements between
Aspire Capital, any other stockholder, broker, dealer, underwriter, or agent relating to the sale or distribution of the shares
offered by this prospectus supplement. At the time a particular offer of shares is made, a prospectus supplement, if required,
will be distributed that will set forth the names of any agents, underwriters, or dealers and any other required information.
We will pay all of
the expenses incident to the registration, offering, and sale of the shares to Aspire Capital. We have agreed to indemnify Aspire
Capital and certain other persons against certain liabilities in connection with the offering of shares of common stock offered
hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required
to be paid in respect of such liabilities. Aspire Capital has agreed to indemnify us against liabilities under the Securities Act
that may arise from certain written information furnished to us by Aspire Capital specifically for use in this prospectus or, if
such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have
been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and
is therefore, unenforceable.
Aspire Capital and
its affiliates have agreed not to engage in any direct or indirect short selling or hedging of our common stock during the term
of the Purchase Agreement.
We have advised Aspire
Capital that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation
M precludes the selling stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution
from bidding for or purchasing, or attempting to induce any person to bid for or purchase any security which is the subject of
the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to
stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability
of the shares offered hereby this prospectus.
We may suspend the
sale of shares to Aspire Capital pursuant to this prospectus for certain periods of time for certain reasons, including if the
prospectus is required to be supplemented or amended to include additional material information.
This offering will
terminate on the date that all shares offered by this prospectus have been sold to Aspire Capital.
LEGAL MATTERS
The validity of the
securities offered by this prospectus supplement will be passed
upon for us by Paul Hastings LLP, Palo Alto, California.
EXPERTS
The financial statements
as of December 31, 2018 and 2017 and for each of the three years in the period ended December 31, 2018, incorporated in this prospectus
supplement by reference from the Sorrento Therapeutics, Inc. and subsidiaries (or the Company) Current
Report on Form 8-K filed on June 17, 2019, and the effectiveness of the Company’s internal control over financial reporting
have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports, which
are incorporated herein by reference (which reports (1) express an unqualified opinion on the consolidated financial statements
and include an explanatory paragraph referring to the Company’s ability to continue as a going concern and (2) express an
adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of material weaknesses).
Such financial statements have been so incorporated in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
INFORMATION INCORPORATED BY REFERENCE;
WHERE YOU CAN FIND MORE INFORMATION
The
SEC allows us to incorporate by reference into this prospectus supplement certain information we file with it, which means that
we can disclose important information by referring you to those documents. The information incorporated by reference is considered
to be a part of this prospectus supplement, and information that we file later with the SEC will automatically update and supersede
information contained in this prospectus supplement and any accompanying prospectus supplement. We incorporate by reference the
documents listed below that we have previously filed with the SEC:
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·
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our Current Reports on Form 8-K filed with the SEC on January
24, 2019, March
22, 2019, May
3, 2019, June 4, 2019, June
5, 2019, June 17, 2019 (filed
at 9:22 a.m. Eastern Time), June
17, 2019 (filed at 4:40 p.m. Eastern Time), June
19, 2019 (other than with respect to Item 7.01 thereof and Exhibits 99.1 and 99.2 thereto), June
20, 2019, June 28, 2019, July
2, 2019, August 12, 2019 (filed
at 10:07 a.m. Eastern Time), August
12, 2019 (filed at 10:10 a.m. Eastern Time), September
23, 2019 (filed at 6:06 a.m. Eastern Time), September
23, 2019 (filed at 7:00 a.m. Eastern Time), October
1, 2019 (filed at 4:28 p.m. Eastern Time) and October
1, 2019 (filed at 4:32 p.m. Eastern Time), October
8, 2019, October
9, 2019, December
9, 2019, December 20,
2019, January 27, 2020 and
February 11, 2020; and
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All documents we file
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this prospectus supplement
and before the completion of the offering of the securities described in this prospectus supplement will also be incorporated by
reference in this prospectus supplement from the date of filing of such documents. Upon request, we will provide to each person,
including any beneficial owner, to whom a prospectus supplement is delivered, a copy of any or all of the information that has been
incorporated by reference in this prospectus supplement but not delivered with this prospectus supplement.
Notwithstanding the
preceding, unless specifically stated to the contrary, none of the information that we disclose under 2.02 or 7.01 or,
if related to Items 2.02 or 7.01, Item 9.01 of any Current Report on Form 8-K that we may, from time to time,
furnish to the SEC will be incorporated by reference into, or otherwise included in, this prospectus supplement. The information
contained in each of the documents incorporated by reference speaks only as of the date of such document. Any statement contained
in a document incorporated reference or deemed to be incorporated by reference herein, or contained in this prospectus supplement,
shall be deemed to be modified or superseded for purposes of this prospectus supplement to the extent that a statement contained
herein or in any subsequently filed document or report that also is incorporated by reference or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this prospectus supplement.
We file annual, quarterly
and other reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet
at the SEC’s website at http://www.sec.gov. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current
Reports on Form 8-K, including any amendments to those reports, and other information that we file with or furnish to the SEC pursuant
to Section 13(a) or 15(d) of the Exchange Act can also be accessed free of charge through the Internet. These filings will
be available as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
We have filed with
the SEC a registration statement under the Securities Act relating to the offering of these securities. The registration statement,
including the attached exhibits, contains additional relevant information about us and the securities. This prospectus supplement
does not contain all of the information set forth in the registration statement. You can obtain a copy of the registration statement,
at prescribed rates, from the SEC at the address listed above. The registration statement and the documents referred to above are
also available on our corporate website at www.sorrentotherapeutics.com under the heading “Investors”. Unless specifically
listed above, the information contained on the SEC website or our website is not incorporated by reference into this prospectus
supplement and you should not consider that information a part of this prospectus supplement. You may obtain a copy of any of these
documents at no cost, by writing or telephoning us at the following address:
Sorrento Therapeutics, Inc.
4955 Directors Place
San Diego, California
Attention: Corporate Secretary
Phone: (858) 203-4100
This prospectus supplement
may contain information that updates, modifies or is contrary to information in one or more of the documents incorporated by reference
in this prospectus supplement. You should rely only on the information incorporated by reference or provided in this prospectus
supplement. We have not authorized anyone else to provide you with different information. You should not assume that the
information in this prospectus supplement is accurate as of any date other than the date of this prospectus supplement or the
date of the documents incorporated by reference in this prospectus supplement.
PROSPECTUS
$350,000,000
Common Stock
Preferred Stock
Debt Securities
Warrants
Units
We may offer and sell, from time to time in one or more offerings,
up to $350,000,000 in the aggregate of any combination of the securities identified above from time to time in one or more offerings,
either individually or in combination with other securities. We may also offer common stock or preferred stock upon conversion
of debt securities, common stock upon conversion of preferred stock, or common stock, preferred stock or debt securities upon the
exercise of warrants.
Each time we offer and sell securities, we will provide a supplement
to this prospectus that contains specific information about the offering and the amounts, prices and terms of the securities. We
may also authorize one or more free writing prospectuses to be provided to you in connection with these offerings. The prospectus
supplement and any related free writing prospectuses may also add, update or change information contained in this prospectus with
respect to that offering. You should carefully read this prospectus and the applicable prospectus supplement and any related free
writing prospectus, as well as any documents incorporated by reference, before you invest in any of our securities.
We may offer and sell the securities described in this prospectus
and any prospectus supplement to or through one or more underwriters, dealers and agents, or directly to purchasers, or through
a combination of these methods. If any underwriters, dealers or agents are involved in the sale of any of the securities, their
names and any applicable purchase price, fee, commission or discount arrangement between or among them will be set forth, or will
be calculable from the information set forth, in the applicable prospectus supplement. See the sections of this prospectus entitled
“About this Prospectus” and “Plan of Distribution” for more information. No securities may be sold without
delivery of this prospectus and the applicable prospectus supplement describing the method and terms of the offering of such securities.
Investing in our securities involves a high degree of
risk. You should review carefully the risks and uncertainties described under the heading “Risk Factors” on page 3
of this prospectus, the applicable prospectus supplement and in any applicable free writing prospectuses, and under similar headings
in the documents that are incorporated by reference into this prospectus.
Our common stock is currently listed on the Nasdaq Capital Market
under the symbol “SRNE.” On November 29, 2017, the last reported sale price of our common stock was $2.20. The applicable
prospectus supplement will contain information, where applicable, as to any other listing on the Nasdaq Capital Market or any securities
market or other exchange of the securities, if any, covered by the applicable prospectus supplement.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities, or passed upon the adequacy or accuracy of this prospectus.
Any representation to the contrary is a criminal offense.
The date of this prospectus is December
6, 2017.
Table of Contents
ABOUT THIS PROSPECTUS
This prospectus is
part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission, or the SEC, utilizing
a “shelf” registration process. Under this shelf registration process, we may offer and sell shares of our common stock
and preferred stock, various series of debt securities, warrants to purchase any of such securities and/or units consisting of
any combination of such securities, either individually or in combination with other securities, in one or more offerings, up to
a total dollar amount of $350,000,000. This prospectus provides you with a general description of the securities we may offer.
Each time we offer
securities under this prospectus, we will provide a prospectus supplement that will contain more specific information about the
terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material
information relating to these offerings. The prospectus supplement and any related free writing prospectus we have authorized for
use in connection with a specific offering may also add, update or change any of the information contained in this prospectus or
in the documents that we have incorporated by reference into this prospectus. We urge you to read carefully this prospectus, the
applicable prospectus supplement and any free writing prospectuses we have authorized for use in connection with a specific offering,
together with the information incorporated herein by reference as described under the section entitled “Incorporation of
Documents by Reference”, before buying any of the securities being offered.
This
prospectus may not be used to consummate a sale of securities unless it is accompanied by a prospectus supplement.
You should rely only
on the information contained in, or incorporated by reference into, this prospectus, the applicable prospectus supplement and any
free writing prospectuses, along with the information contained in any free writing prospectuses we have authorized for use in
connection with a specific offering. We have not authorized anyone to provide you with different or additional information. This
prospectus is an offer to sell only the securities offered hereby, but only under circumstances and in jurisdictions where it is
lawful to do so.
The information appearing
in this prospectus, the applicable prospectus supplement or any related free writing prospectus is accurate only as of the date
on the front of the document and any information we have incorporated by reference is accurate only as of the date of the document
incorporated by reference, regardless of the time of delivery of this prospectus, the applicable prospectus supplement or any related
free writing prospectus, or any sale of a security. Our business, financial condition, results of operations and prospects may
have changed since those dates.
This prospectus contains
summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents
for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents
referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement
of which this prospectus is a part, and you may obtain copies of those documents as described below under the heading “Where
You Can Find More Information”.
SUMMARY
This summary highlights
selected information that is presented in greater detail elsewhere in this prospectus or incorporated by reference in this prospectus.
Because it is only a summary, it does not contain all of the information you should consider before investing in our common stock,
preferred stock, debt securities, warrants or units, and it is qualified in its entirety by, and should be read in conjunction
with, the more detailed information included elsewhere in this prospectus. Before you decide whether to purchase shares of our
common stock or preferred stock, or our debt securities, warrants or units, you should read this entire prospectus, the applicable
prospectus supplement and any related free writing prospectus carefully, including the risks of investing in our securities discussed
under the heading “Risk Factors” contained in the applicable prospectus supplement and any related free writing prospectus,
and under similar headings in the other documents that are incorporated by reference into this prospectus. You should also carefully
read the information incorporated by reference into this prospectus, including our financial statements, and the exhibits to the
registration statement of which this prospectus is a part. Unless the context otherwise requires, the terms “Sorrento,”
“the Company,” “we,” “us” and “our” in this prospectus refer to Sorrento Therapeutics,
Inc. and its subsidiaries.
Business Overview
We are a clinical
stage biotechnology company focused on delivering clinically meaningful therapies to patients and their families, globally. Our
primary focus is to transform cancer into a treatable or chronically manageable disease. We also have programs assessing the use
of our technologies and products in auto-immune, inflammatory, neurodegenerative and infectious diseases and pain indications with
high unmet medical needs.
At our core, we are
an antibody-centric company and leverage our proprietary G-MAB library and targeted delivery modalities to generate the next generation
of cancer therapeutics. Our validated fully human antibodies include PD-1, PD-L1, CD38, CD123, CD47, c-MET, VEGFR2, CCR2, OX40,
TIGIT and CD137 among others. Our vision is to leverage these antibodies in conjunction with proprietary targeted delivery modalities
to generate the next generation of cancer therapeutics. These modalities include proprietary antibody drug conjugates, bispecific
approaches, as well as TCR-like antibodies. With LA Cell, Inc., our joint venture with City of Hope, our objective is to become
the global leader in the development of antibodies against intracellular targets such as STAT3, mutant KRAS, MYC, p53 and TAU.
Additionally, we have acquired and are assessing the regulatory and strategic path forward for our portfolio of late stage biosimilar/biobetter
antibodies based on Erbitux®, Remicade®, Xolair®, and Simulect® as these may represent nearer term commercial opportunities.
Although we intend
to retain ownership and control of product candidates by advancing their development, we regularly also consider (i) partnerships
with pharmaceutical or biopharmaceutical companies and (ii) license or sale of certain products in each case, in order to balance
the risks and costs associated with drug discovery, development and commercialization with efforts to maximize our stockholders’
returns. Our partnering objectives include generating revenue through license fees, milestone-related development fees and royalties
as well as profit shares or joint ventures to generate potential returns from our product candidates and technologies. For a complete
description of our business, financial condition, results of operations and other important information, we refer you to our filings
with the Securities and Exchange Commission, or the SEC, that are incorporated by reference in this prospectus, including our Annual Report on Form 10-K for the year ended December 31, 2016, as amended. For instructions on how to find copies of these documents,
see “Where You Can Find More Information”.
Corporate Information
On September 21, 2009,
QuikByte Software, Inc., a Colorado corporation and shell company, or QuikByte, consummated its acquisition of Sorrento Therapeutics,
Inc., a Delaware corporation and private concern, or STI, in a reverse merger, or the Merger. Pursuant to the Merger, all of the
issued and outstanding shares of STI common stock were converted into an aggregate of 6,775,032 shares of QuikByte common stock
and STI became a wholly owned subsidiary of QuikByte. The holders of QuikByte’s common stock immediately prior to the Merger
held an aggregate of 2,228,333 shares of QuikByte’s common stock immediately following the Merger.
We were originally
incorporated as San Diego Antibody Company in California in 2006 and were renamed “Sorrento Therapeutics, Inc.” and
reincorporated in Delaware in 2009, prior to the Merger. QuikByte was originally incorporated in Colorado in 1989. Following the
Merger, on December 4, 2009, QuikByte reincorporated under the laws of the State of Delaware, or the Reincorporation. Immediately
following the Reincorporation, on December 4, 2009, we merged with and into QuikByte, the separate corporate existence of STI ceased
and QuikByte continued as the surviving corporation, or the Roll-Up Merger. Pursuant to the certificate of merger filed in connection
with the Roll-Up Merger, QuikByte’s name was changed from “QuikByte Software, Inc.” to “Sorrento Therapeutics,
Inc.”.
Our principal executive
offices are located at 4955 Directors Place, San Diego, CA 92121, and our telephone number at that address is (858) 203-4100. Our
website is www.sorrentotherapeutics.com. Any information contained on, or that can be accessed through, our website is not incorporated
by reference into, nor is it in any way part of this prospectus and should not be relied upon in connection with making any decision
with respect to an investment in our securities. We are required to file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may obtain any of the documents filed by us with the SEC at no cost from the SEC’s
website at http://www.sec.gov .
RISK FACTORS
Investing in any securities
offered pursuant to this prospectus, the applicable prospectus supplement and any related free writing prospectus involves a high
degree of risk. Before making an investment decision, you should carefully consider the risks described under “Risk Factors”
in the applicable prospectus supplement, any related free writing prospectus and in our most recent Annual Report on Form 10-K,
or any updates in our Quarterly Reports on Form 10-Q, together with all of the other information appearing in or incorporated by
reference into this prospectus, the applicable prospectus supplement and any related free writing prospectus, before deciding whether
to purchase any of the securities being offered. Our business, financial condition or results of operations could be materially
adversely affected by any of these risks. The occurrence of any of these risks might cause you to lose all or part of your investment
in the offered securities.
DISCLOSURE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus, any
accompanying prospectus supplement and the documents incorporated by reference into this prospectus may contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E
of the Securities Exchange Act of 1934, as amended, or the Exchange Act, about Sorrento. These forward-looking statements are intended
to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are not statements of historical fact, and can be identified by the use of forward-looking terminology
such as “believes”, “expects”, “may”, “will”, “could”, “should”,
“projects”, “plans”, “goal”, “targets”, “potential”, “estimates”,
“pro forma”, “seeks”, “intends” or “anticipates” or the negative thereof or comparable
terminology. Forward-looking statements include discussions of strategy, financial projections, guidance and estimates (including
their underlying assumptions), statements regarding plans, objectives, expectations or consequences of various transactions, and
statements about the future performance, operations, products and services of the Sorrento. We caution our stockholders and other
readers not to place undue reliance on such statements.
You should read this
prospectus, any accompanying prospectus supplement and the documents incorporated by reference completely and with the understanding
that our actual future results may be materially different from what we currently expect. Our business and operations are and will
be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ
from those contained in any forward-looking statements. Such risks, uncertainties and other factors that could cause actual results
and experience to differ from those projected include, but are not limited to, the risk factors set forth in Part I - Item 1A,
“Risk Factors”, in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC on March 22, 2017, as amended, and elsewhere in the documents incorporated by reference into this prospectus.
You should assume
that the information appearing in this prospectus, any accompanying prospectus supplement, any related free writing prospectus
and any document incorporated herein by reference is accurate as of its date only. Because the risk factors referred to above
could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or
on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks
only as of the date on which it is made. New factors emerge from time to time, and it is not possible for us to predict which factors
will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination
of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All written or
oral forward-looking statements attributable to us or any person acting on our behalf made after the date of this prospectus are
expressly qualified in their entirety by the risk factors and cautionary statements contained in and incorporated by reference
into this prospectus. Unless legally required, we do not undertake any obligation to release publicly any revisions to such forward-looking
statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.
USE OF PROCEEDS
Except as otherwise
provided in the applicable prospectus supplement or in any free writing prospectuses we have authorized for use in connection with
a specific offering, we currently intend to use the net proceeds from the sale of the securities offered by this prospectus, if
any, for working capital and general corporate purposes, which may include capital expenditures, research and development expenditures,
regulatory affairs expenditures, clinical trial expenditures, acquisitions of new technologies and investments, business combinations
and the repayment, refinancing, redemption or repurchase of indebtedness or capital stock.
The intended application
of proceeds from the sale of any particular offering of securities using this prospectus will be described in the accompanying
prospectus supplement relating to such offering. The precise amount and timing of the application of these proceeds will depend
upon a number of factors, such as the timing and progress of our research and development efforts, our funding requirements and
the availability and costs of other funds. Pending application of the net proceeds as described above, we intend to temporarily
invest the proceeds in short-term, interest-bearing instruments.
RATIO OF EARNINGS TO FIXED CHARGES
The following table
sets forth the historical ratios of earnings to fixed charges for Sorrento for the periods indicated.
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Year Ended December 31,
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Nine Months Ended
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2012
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2013
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2014
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2015
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2016
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September 30, 2017
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Ratio of earnings to fixed charges
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*
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*
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*
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*
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*
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14.2
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* Our earnings were insufficient to cover
fixed charges for the years ended December 31, 2012, 2013, 2014, 2015 or 2016 and we are unable to disclose a ratio of earnings
to fixed charges for such periods. The dollar amount of the deficiency in earnings available for fixed charges for the years ended
December 31, 2012, 2013, 2014, 2015 and 2016 was $(4.8) million, $(21.9) million, $(36.4) million, $(13.8) million and $(64.8)
million, respectively.
DESCRIPTION OF CAPITAL STOCK
General Matters
As of November 1,
2017, our authorized capital stock consisted of 750,000,000 shares of common stock, $0.0001 par value per share, and 100,000,000
shares of preferred stock, $0.0001 par value per share. Our board of directors, or our Board, may establish the rights and preferences
of the preferred stock from time to time. As of November 1, 2017, there were 79,321,842 shares of our common stock issued and outstanding
and no shares of preferred stock issued and outstanding.
Common Stock
Holders of our common
stock are entitled to one vote per share. Our Restated Certificate of Incorporation, as amended, or our Certificate of Incorporation,
does not provide for cumulative voting. Holders of our common stock are entitled to receive ratably such dividends, if any, as
may be declared by our Board out of legally available funds. However, the current policy of our Board is to retain earnings, if
any, for our operations and potential expansion of our business. Upon liquidation, dissolution or winding-up, the holders of our
common stock are entitled to share ratably in all of our assets which are legally available for distribution, after payment of
or provision for all liabilities. The holders of our common stock have no preemptive, subscription, redemption or conversion rights.
Preferred Stock
As of the date of
this prospectus, no shares of preferred stock are issued and outstanding. Our Certificate of Incorporation provides that our Board
may by resolution, without further vote or action by the stockholders, establish one or more classes or series of preferred stock
having the number of shares and relative voting rights, designation, dividend rates, liquidation, and other rights, preferences,
and limitations as may be fixed by them without further stockholder approval. Once designated by our Board, each series of preferred
stock will have specific financial and other terms that will be set forth in the applicable certificate of designation for the
series. Prior to the issuance of shares of each series of preferred stock, our Board is required by the General Corporation Law
of the State of Delaware, or the DGCL, and our Certificate of Incorporation to adopt resolutions and file a certificate of designation
with the Secretary of State of the State of Delaware. The certificate of designation fixes for each class or series the designations,
powers, preferences, rights, qualifications, limitations and restrictions, including, but not limited to, some or all of the following:
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(a)
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The distinctive designation of such series and the number of shares which shall constitute such
series, which number may be increased (except where otherwise provided by our Board in creating such series) or decreased (but
not below the number of shares thereof then outstanding) from time to time by resolution of our Board;
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(b)
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The rate and manner of payment of dividends payable on shares of such series, including the dividend
rate, date of declaration and payment, whether dividends shall be cumulative, and the conditions upon which and the date from which
such dividends shall be cumulative;
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(c)
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Whether shares of such series shall be redeemable, the time or times when, and the price or prices
at which, shares of such series shall be redeemable, the redemption price, the terms and conditions of redemption, and the sinking
fund provisions, if any, for the purchase or redemption of such shares;
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(d)
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The amount payable on shares of such series and the rights of holders of such shares in the event
of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company;
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(e)
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The rights, if any, of the holders of shares of such series to convert such shares into, or exchange
such shares for, shares of common stock, other securities, or shares of any other class or series of preferred stock and the terms
and conditions of such conversion or exchange;
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(f)
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The voting rights, if any, and whether full or limited, of the shares of such series, which may
include no voting rights, one vote per share, or such higher or lower number of votes per share as may be designated by our Board;
and
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(g)
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The preemptive or preferential rights, if any, of the holders of shares of such series to subscribe
for, purchase, receive, or otherwise acquire any part of any new or additional issue of stock of any class, whether now or hereafter
authorized, or of any bonds, debentures, notes, or any of our other securities, whether or not convertible into shares of our common
stock.
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In connection with
the adoption of a rights agreement, dated November 7, 2013, we filed a Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock, or the Certificate of Designation, with the Secretary of State of the State
of Delaware, which designated 1,000,000 shares of Preferred Stock as Series A Junior Participating Preferred Stock. The rights,
preferences and privileges of the Series A Junior Participating Preferred Stock are as set forth in the Certificate of Designation.
The rights agreement was amended and restated in December 2015 and is described below under “-Anti-Takeover Effects of Certain
Provisions of our Certificate of Incorporation, Bylaws and the DGCL-Stockholder Rights Agreement”.
All shares of preferred
stock offered hereby will, when issued, be fully paid and nonassessable, including shares of preferred stock issued upon the exercise
of preferred stock warrants or subscription rights, if any.
Although our Board
has no intention at the present time of doing so, it could authorize the issuance of a series of preferred stock that could, depending
on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt.
Anti-Takeover Effects of Certain Provisions of our Certificate
of Incorporation, Bylaws and the DGCL
Certain provisions
of our Certificate of Incorporation and Bylaws, which are summarized in the following paragraphs, may have the effect of discouraging
potential acquisition proposals or tender offers or delaying or preventing a change in control, including changes a stockholder
might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.
In particular, our Certificate of Incorporation and Bylaws and Delaware law, as applicable, among other things:
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·
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provide our Board with the ability to alter our Bylaws without stockholder approval;
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place limitations on the removal of directors; and
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provide that vacancies on our Board may be filled by a majority of directors in office, although
less than a quorum.
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These provisions are
expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking
to acquire control of our company to first negotiate with our Board. These provisions may delay or prevent someone from acquiring
or merging with us, which may cause the market price of our common stock to decline.
Blank Check Preferred.
Our Board is authorized to create and issue from time to time, without stockholder approval, up to an aggregate of 100,000,000
shares of preferred stock in one or more series and to establish the number of shares of any series of preferred stock and to fix
the designations, powers, preferences and rights of the shares of each series and any qualifications, limitations or restrictions
of the shares of each series.
The authority to designate
preferred stock may be used to issue a series of preferred stock, or rights to acquire preferred stock, that could dilute the interest
of, or impair the voting power of, holders of the common stock or could also be used as a method of determining, delaying or preventing
a change of control.
Advance Notice
Bylaws. The Bylaws contain an advance notice procedure for stockholder proposals to be brought before any meeting of stockholders,
including proposed nominations of persons for election to our Board. Stockholders at any meeting will only be able to consider
proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our Board or
by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and
who has given the Company’s corporate secretary timely written notice, in proper form, of the stockholder’s intention
to bring that business before the meeting. Although our Bylaws do not give our Board the power to approve or disapprove of stockholder
nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, our Bylaws may
have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage
or deter a potential acquiror from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting
to obtain control of the Company.
Interested Stockholder
Transactions. We are subject to Section 203 of the DGCL, which prohibits “business combinations” between
a publicly-held Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who
is a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year period following the date
that such stockholder became an interested stockholder, unless: (i) the transaction is approved by the board of directors before
the date the interested stockholder attained that status; (ii) upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding
at the time the transaction commenced; or (iii) on or after the date of the transaction, the transaction is approved by the board
of directors and authorized at a meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3%
of the outstanding voting stock that is not owned by the interested stockholder. In general, the DGCL defines a business combination
to include the following: (a) any merger or consolidation involving the corporation and the interested stockholder; (b) any sale,
transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder; (c)
subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; (d) any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; or
(e) the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.
Stockholder Rights
Agreement. In December 2015, we entered into an Amended and Restated Rights Agreement, or the Amended Rights Agreement, with
Philadelphia Stock Transfer, Inc., as Rights Agent. The Amended Rights Agreement provides that in the event of (i) an acquisition
of 15% or more of our outstanding common stock by any person other than a beneficial owner of 15% of our outstanding common stock
as of December 21, 2015, (ii) an acquisition of one or more shares of our common stock by any person who beneficially owned 15%
or more of our outstanding common stock as of December 21, 2015, or (iii) an announcement of an intention to make a tender
offer or exchange offer for 15% or more of our outstanding common stock, our stockholders, other than the potential acquiror, shall
be granted rights enabling them to purchase additional shares of our common stock at a substantial discount to the then prevailing
market price. The Amended Rights Agreement could significantly dilute such acquiror’s ownership position in our shares, thereby
making a takeover prohibitively expensive and encouraging such acquiror to negotiate with our Board. Therefore, the Amended Rights
Agreement could make it more difficult for a third party to acquire control of us without the approval of our Board.
Warrants
As of November 1,
2017, warrants to purchase 5,932,998 shares of common stock with a weighted-average exercise price of $7.80 per share were outstanding.
All of our outstanding warrants are currently exercisable, except to the extent that certain of them may be subject to a blocker
provision, which restricts the exercise of a warrant if, as a result of such exercise, the warrant holder, together with its affiliates
and any other person whose beneficial ownership of common stock would be aggregated with the warrant holder’s for purposes
of Section 13(d) of the Exchange Act, would beneficially own in excess of 19.99% or 19.9% of our then issued and outstanding shares
of common stock (including the shares of common stock issuable upon such exercise), as such percentage ownership is determined
in accordance with the terms of such warrant. All of our outstanding warrants contain provisions for the adjustment of the exercise
price in the event of stock dividends, stock splits or similar transactions. In addition, certain of the warrants contain a “cashless
exercise” feature that allows the holders thereof to exercise the warrants without a cash payment to us under certain circumstances.
Transfer Agent and Registrar
The Transfer Agent
and Registrar for our common stock is Philadelphia Stock Transfer, Inc., 2320 Haverford Road, Suite 230, Ardmore, PA 19003.
DESCRIPTION OF DEBT
SECURITIES
We may issue debt
securities from time to time, in one or more series, as either senior or subordinated debt or as senior or subordinated convertible
debt. While the terms we have summarized below will apply generally to any debt securities that we may offer under this prospectus,
we will describe the particular terms of any debt securities that we may offer in more detail in the applicable prospectus supplement.
The terms of any debt securities offered under a prospectus supplement may differ from the terms described below. Unless the context
requires otherwise, whenever we refer to the indenture, we also are referring to any supplemental indentures that specify the terms
of a particular series of debt securities.
We will issue the
debt securities under the indenture that we will enter into with the trustee named in the indenture. The indenture will be qualified
under the Trust Indenture Act of 1939, as amended, or the Trust Indenture Act. We have filed the form of indenture as an exhibit
to the registration statement of which this prospectus is a part, and supplemental indentures and forms of debt securities containing
the terms of the debt securities being offered will be filed as exhibits to the registration statement of which this prospectus
is a part or will be incorporated by reference from reports that we file with the SEC.
The following summary
of material provisions of the debt securities and the indenture is subject to, and qualified in its entirety by reference to, all
of the provisions of the indenture applicable to a particular series of debt securities. We urge you to read the applicable prospectus
supplements and any related free writing prospectuses we authorize for use in connection with a specific offering of debt securities,
as well as the complete indenture that contains the terms of the debt securities.
General Matters
The indenture does
not limit the amount of debt securities that we may issue. It provides that we may issue debt securities up to the principal amount
that we may authorize and in any currency or currency unit that we may designate. Except for the limitations on consolidation,
merger and sale of all or substantially all of our assets contained in the indenture, the terms of the indenture do not contain
any covenants or other provisions designed to give holders of any debt securities protection against changes in our operations
or financial condition or transactions involving us.
We may issue the debt
securities issued under the indenture as “discount securities”, which means they may be sold at a discount below their
stated principal amount. These debt securities, as well as other debt securities that are not issued at a discount, may be issued
with “original issue discount”, or OID, for U.S. federal income tax purposes because of interest payment and other
characteristics or terms of the debt securities. Material U.S. federal income tax considerations applicable to debt securities
issued with OID will be described in more detail in the applicable prospectus supplement.
We will describe in
the applicable prospectus supplement the terms of the series of debt securities being offered, including:
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the title of the series of debt securities;
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any limit upon the aggregate principal amount that may be issued;
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the maturity date or dates;
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the form of the debt securities of the series;
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the applicability of any guarantees;
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whether or not the debt securities will be secured or unsecured, and the terms of any secured debt;
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whether the debt securities rank as senior debt, senior subordinated debt, subordinated debt or
any combination thereof, and the terms of any subordination;
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if the price (expressed as a percentage of the aggregate principal amount thereof) at which the
debt securities will be issued is a price other than the principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof, or if applicable, the portion of the principal amount of such
debt securities that is convertible into another security or the method by which any such portion shall be determined;
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the interest rate or rates, which may be fixed or variable, or the method for determining the rate
and the date interest will begin to accrue, the dates interest will be payable and the regular record dates for interest payment
dates or the method for determining such dates;
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our right, if any, to defer payment of interest and the maximum length of any such deferral period;
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if applicable, the date or dates after which, or the period or periods during which, and the price
or prices at which, we may, at our option, redeem the series of debt securities pursuant to any optional or provisional redemption
provisions and the terms of those redemption provisions;
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the date or dates, if any, on which, and the price or prices at which we are obligated, pursuant
to any mandatory sinking fund or analogous fund provisions or otherwise, to redeem, or at the holder’s option to purchase,
the series of debt securities and the currency or currency unit in which the debt securities are payable;
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the denominations in which we will issue the series of debt securities, if other than denominations
of $1,000 and any integral multiple thereof;
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any and all terms, if applicable, relating to any auction or remarketing of the debt securities
of that series and any security for our obligations with respect to such debt securities and any other terms which may be advisable
in connection with the marketing of debt securities of that series;
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whether the debt securities of the series shall be issued in whole or in part in the form of a
global security or securities; the terms and conditions, if any, upon which such global security or securities may be exchanged
in whole or in part for other individual securities, and the depositary for such global security or securities;
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if applicable, the provisions relating to conversion or exchange of any debt securities of the
series and the terms and conditions upon which such debt securities will be so convertible or exchangeable, including the conversion
or exchange price, as applicable, or how it will be calculated and may be adjusted, any mandatory or optional (at our option or
at the holders’ option) conversion or exchange features, the applicable conversion or exchange period and the manner of settlement
for any conversion or exchange;
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if other than the full principal amount thereof, the portion of the principal amount of debt securities
of the series which shall be payable upon declaration of acceleration of the maturity thereof;
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additions to or changes in the covenants applicable to the particular debt securities being issued,
including, among others, the consolidation, merger or sale covenant;
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additions to or changes in the events of default with respect to the securities and any change
in the right of the trustee or the holders to declare the principal, premium, if any, and interest, if any, with respect to such
securities to be due and payable;
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additions to or changes in or deletions of the provisions relating to covenant defeasance and legal
defeasance;
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additions to or changes in the provisions relating to satisfaction and discharge of the indenture;
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additions to or changes in the provisions relating to the modification of the indenture both with
and without the consent of the holders of the debt securities issued under the indenture;
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the currency of payment of the debt securities if other than U.S. dollars and the manner of determining
the equivalent amount in U.S. dollars;
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whether interest will be payable in cash or additional debt securities at our or the holders’
option and the terms and conditions upon which the election may be made;
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the terms and conditions, if any, upon which we will pay amounts in addition to the stated interest,
premium, if any, and principal amounts of the debt securities of the series to any holder that is not a “United States person”
for federal tax purposes;
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any restrictions on transfer, sale or assignment of the debt securities of the series; and
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any other specific terms, preferences, rights or limitations of, or restrictions on, the debt securities,
any other additions or changes in the provisions of the indenture, and any terms that may be required by us or advisable under
applicable laws or regulations.
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Conversion or Exchange Rights
We will set forth
in the applicable prospectus supplement the terms on which a series of debt securities may be convertible into or exchangeable
for our common stock or our other securities. We will include provisions as to settlement upon conversion or exchange and whether
conversion or exchange is mandatory, at the option of the holder or at our option. We may include provisions pursuant to which
the number of shares of our common stock or our other securities that the holders of the series of debt securities receive would
be subject to adjustment.
Consolidation, Merger or Sale
Unless we provide
otherwise in the prospectus supplement applicable to a particular series of debt securities, the indenture will not contain any
covenant that restricts our ability to merge or consolidate, or sell, convey, transfer or otherwise dispose of our assets as an
entirety or substantially as an entirety. However, any successor to or acquirer of such assets (other than a subsidiary of ours)
must assume all of our obligations under the indenture or the debt securities, as appropriate.
Events of Default under the Indenture
Unless we provide
otherwise in the prospectus supplement applicable to a particular series of debt securities, the following are events of default
under the indenture with respect to any series of debt securities that we may issue:
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if we fail to pay any installment of interest on any series of debt securities, as and when the
same shall become due and payable, and such default continues for a period of 90 days; provided, however, that a valid extension
of an interest payment period by us in accordance with the terms of any indenture supplemental thereto shall not constitute a default
in the payment of interest for this purpose;
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if we fail to pay the principal of, or premium, if any, on any series of debt securities as and
when the same shall become due and payable whether at maturity, upon redemption, by declaration or otherwise, or in any payment
required by any sinking or analogous fund established with respect to such series; provided, however, that a valid extension of
the maturity of such debt securities in accordance with the terms of any indenture supplemental thereto shall not constitute a
default in the payment of principal or premium, if any;
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if we fail to observe or perform any other covenant or agreement contained in the debt securities
or the indenture, other than a covenant specifically relating to another series of debt securities, and our failure continues for
a period of 90 days after we receive written notice of such failure, requiring the same to be remedied and stating that such
is a notice of default thereunder, from the trustee or holders of at least 25% of the aggregate principal amount of the outstanding
debt securities of the applicable series; and
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if specified events of bankruptcy, insolvency or reorganization occur.
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If an event of default
with respect to debt securities of any series occurs and is continuing, other than certain specified events of bankruptcy, insolvency
or reorganization, the trustee or the holders of at least 25% of the aggregate principal amount of the outstanding debt securities
of that series, by notice to us in writing, and to the trustee if notice is given by such holders, may declare the unpaid principal,
premium, if any, and accrued interest, if any, of such series of debt securities immediately due and payable. If certain specified
events of bankruptcy, insolvency or reorganization occur with respect to us, the principal amount and accrued interest, if any,
of each issue of debt securities then outstanding shall be due and payable without any notice or other action on the part of the
trustee or any holder.
The holders of a majority
of the principal amount of the outstanding debt securities of an affected series may waive any default or event of default with
respect to the series and its consequences, except defaults or events of default regarding payment of principal, premium, if any,
or interest, unless we have cured the default or event of default in accordance with the indenture. Any waiver shall cure the default
or event of default.
Subject to the terms
of the indenture, if an event of default under an indenture shall occur and be continuing, the trustee will be under no obligation
to exercise any of its rights or powers under such indenture at the request or direction of any of the holders of the applicable
series of debt securities, unless such holders have offered the trustee reasonable indemnity. The holders of a majority of the
principal amount of the outstanding debt securities of any series will have the right to direct the time, method and place of conducting
any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, with respect
to the debt securities of that series, provided that:
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the direction so given by the holder is not in conflict with any law or the applicable indenture;
and
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subject to its duties under the Trust Indenture Act, the trustee need not take any action that
might involve it in personal liability or might be unduly prejudicial to the holders not involved in the proceeding.
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A holder of the debt
securities of any series will have the right to institute a proceeding under the indenture or to appoint a receiver or trustee,
or to seek other remedies, only if:
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the holder has given written notice to the trustee of a continuing event of default with respect
to that series;
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the holders of at least 25% of the aggregate principal amount of the outstanding debt securities
of that series have made a written request;
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such holders have offered to the trustee indemnity satisfactory to it against the costs, expenses
and liabilities to be incurred by the trustee in compliance with the request; and
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the trustee does not institute the proceeding, and does not receive from the holders of a majority
of the aggregate principal amount of the outstanding debt securities of that series other conflicting directions within 90 days
after the notice, request and offer.
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These limitations
do not apply to a suit instituted by a holder of debt securities if we default in the payment of the principal of, or the premium,
if any, or interest on, the debt securities.
We will periodically
file statements with the trustee regarding our compliance with specified covenants in the indenture.
Modification of Indenture; Waiver
Unless we provide
otherwise in the prospectus supplement applicable to a particular series of debt securities, we and the trustee may change an indenture
without the consent of any holders with respect to specific matters, including, but not limited to, the following:
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to cure any ambiguity, defect or inconsistency in the indenture or in the debt securities of any
series;
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to comply with the provisions described above under “-Consolidation, Merger or Sale”;
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to provide for uncertificated debt securities in addition to or in place of certificated debt securities;
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to add to our covenants, restrictions, conditions or provisions such new covenants, restrictions,
conditions or provisions for the benefit of the holders of all or any series of debt securities, to make the occurrence, or the
occurrence and the continuance, of a default in any such additional covenants, restrictions, conditions or provisions an event
of default or to surrender any right or power conferred upon us in the indenture;
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to add to, delete from or revise the conditions, limitations and restrictions on the authorized
amount, terms or purposes of issue, authentication and delivery of debt securities, as set forth in the indenture;
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to make any change that does not adversely affect the interests of any holder of debt securities
of any series in any material respect;
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to provide for the issuance of, and to establish the form and terms and conditions of, the debt
securities of any series as provided above under “-General Matters”, to establish the form of any certifications required
to be furnished pursuant to the terms of the indenture or any series of debt securities, or to add to the rights of the holders
of any series of debt securities;
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to evidence and provide for the acceptance of appointment under any indenture by a successor trustee;
or
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to comply with any requirements of the SEC in connection with the qualification of any indenture
under the Trust Indenture Act.
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In addition, under
the indenture, the rights of holders of a series of debt securities may be changed by us and the trustee with the written consent
of the holders of at least a majority of the aggregate principal amount of the outstanding debt securities of each series that
is affected. However, unless we provide otherwise in the prospectus supplement applicable to a particular series of debt securities,
we and the trustee may make the following changes only with the consent of each holder of any outstanding debt securities affected:
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extending the fixed maturity of any debt securities of any series;
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reducing the principal amount, reducing the rate of or extending the time of payment of interest,
or reducing any premium payable upon the redemption of any series of debt securities; or
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reducing the percentage of debt securities, the holders of which are required to consent to any
amendment, supplement, modification or waiver.
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Discharge
The indenture provides
that we can elect to be discharged from our obligations with respect to one or more series of debt securities, except for specified
obligations, including, but not limited to, the following obligations to:
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register the transfer or exchange of debt securities of the series;
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replace stolen, lost or mutilated debt securities of the series;
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pay principal of and premium and interest on any debt securities of the series;
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maintain paying agencies;
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hold monies for payment in trust;
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recover excess money held by the trustee;
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compensate and indemnify the trustee; and
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appoint any successor trustee.
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In order to exercise
our rights to be discharged, we must deposit with the trustee money or government obligations sufficient to pay all the principal
of, and any premium, if any, and interest on, the debt securities of the series on the dates payments are due.
Form, Exchange and Transfer
We will issue the
debt securities of each series only in fully registered form without coupons and, unless we provide otherwise in the applicable
prospectus supplement, in denominations of $1,000 and any integral multiple thereof. The indenture provides that we may issue debt
securities of a series in temporary or permanent global form and as book-entry securities that will be deposited with, or on behalf
of, The Depository Trust Company, New York, New York, known as DTC, or another depositary named by us and identified in the applicable
prospectus supplement with respect to that series. To the extent the debt securities of a series are issued in global form and
as book-entry, a description of terms relating to any book-entry securities will be set forth in the applicable prospectus supplement.
At the option of the
holder, subject to the terms of the indenture and the limitations applicable to global securities described in the applicable prospectus
supplement, the holder of the debt securities of any series can exchange the debt securities for other debt securities of the same
series, in any authorized denomination and of like tenor and aggregate principal amount.
Subject to the terms
of the indenture and the limitations applicable to global securities set forth in the applicable prospectus supplement, holders
of the debt securities may present the debt securities for exchange or for registration of transfer, duly endorsed or with the
form of transfer endorsed thereon duly executed if so required by us or the security registrar, at the office of the security registrar
or at the office of any transfer agent designated by us for this purpose. Unless otherwise provided in the debt securities that
the holder presents for transfer or exchange, we will impose no service charge for any registration of transfer or exchange, but
we may require payment of any taxes or other governmental charges.
We will name in the
applicable prospectus supplement the security registrar, and any transfer agent in addition to the security registrar, that we
initially designate for any debt securities. We may at any time designate additional transfer agents or rescind the designation
of any transfer agent or approve a change in the office through which any transfer agent acts, except that we will be required
to maintain a transfer agent in each place of payment for the debt securities of each series.
If we elect to redeem
the debt securities of any series, we will not be required to:
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issue, register the transfer of, or exchange any debt securities of that series during a period
beginning at the opening of business 15 days before the date of mailing of a notice of redemption of any debt securities that
may be selected for redemption and ending at the close of business on the date of the mailing; or
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register the transfer of or exchange any debt securities so selected for redemption, in whole or
in part, except for the unredeemed portion of any debt securities we are redeeming in part.
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Information Concerning the Trustee
The trustee, other
than during the occurrence and continuance of an event of default under an indenture, undertakes to perform only those duties as
are specifically set forth in the applicable indenture. Upon an event of default under an indenture, the trustee must use the same
degree of care as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the
trustee is under no obligation to exercise any of the powers given to it by the indenture at the request of any holder of debt
securities unless it is offered reasonable security and indemnity against the costs, expenses and liabilities that it might incur.
Payment and Paying Agents
Unless we otherwise
indicate in the applicable prospectus supplement, we will make payment of the interest on any debt securities on any interest payment
date to the person in whose name the debt securities, or one or more predecessor securities, are registered at the close of business
on the regular record date for the interest.
We will pay principal
of and any premium and interest on the debt securities of a particular series at the office of the paying agents designated by
us, except that, unless we otherwise indicate in the applicable prospectus supplement, we will make interest payments by check
that we will mail to the holder or by wire transfer to certain holders. Unless we otherwise indicate in the applicable prospectus
supplement, we will designate the corporate trust office of the trustee as our sole paying agent for payments with respect to debt
securities of each series. We will name in the applicable prospectus supplement any other paying agents that we initially designate
for the debt securities of a particular series. We will maintain a paying agent in each place of payment for the debt securities
of a particular series.
All money we pay to
a paying agent or the trustee for the payment of the principal of, or any premium or interest on, any debt securities that remains
unclaimed at the end of two years after such principal, premium or interest has become due and payable will be repaid to us, and
the holder of the debt security thereafter may look only to us for payment thereof.
Governing Law
The indenture and
the debt securities, and any claim, controversy or dispute arising under or related to the indenture or the debt securities, will
be governed by and construed in accordance with the laws of the State of New York, except to the extent that the Trust Indenture
Act is applicable.
Hercules Loan and Security Agreement
On November 23, 2016,
we and certain of our domestic subsidiaries, or collectively, the Borrowers, entered into that certain Loan and Security Agreement,
dated as of November 23, 2016, with the several banks and other financial institutions or entities from time to time parties
thereto as lender, and Hercules Capital, Inc., in its capacity as administrative agent and collateral agent for itself and the
lender, or collectively, Hercules, as amended, or the Hercules Agreement, for a term loan of up to $75.0 million, subject to funding
in multiple tranches.
The Hercules Agreement
contains customary affirmative and restrictive covenants and representations and warranties, including financial reporting obligations
and significant limitations on dividends, indebtedness, liens (including a negative pledge on intellectual property and other assets),
collateral, investments, distributions, transfers, mergers or acquisitions, taxes, corporate changes, deposit accounts and subsidiaries.
Additionally, the Hercules Agreement contains covenants requiring the Borrowers to maintain a minimum amount of unrestricted cash
prior to achieving their corporate and fundraising milestones. The breach of such covenants, in addition to certain other covenants,
would result in the occurrence of an event of default. Upon the occurrence of an event of default and following any applicable
cure periods, a default interest rate of an additional 5.00% may be applied to the outstanding loan balances, and Hercules may
declare all outstanding obligations immediately due and payable and take such other actions as set forth in the Hercules Agreement.
The affirmative covenants
include, among others, covenants requiring us to maintain our legal existence and governmental approvals, deliver certain financial
reports and maintain insurance coverage. The negative covenants include, among others, restrictions on transferring collateral,
changing our business, incurring additional indebtedness, engaging in mergers or acquisitions, paying dividends or making other
distributions, making investments and creating other liens on our assets, in each case subject to customary exceptions. If we default
under the Hercules Agreement, Hercules may accelerate all of our repayment obligations and take control of our pledged assets,
potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further,
if we are liquidated, Hercules’ right to repayment would be senior to the rights of the holders of our common stock to receive
any proceeds from the liquidation. Hercules could declare a default upon the occurrence of any event that they interpret as a material
adverse change as defined under the Hercules Agreement, thereby requiring us to repay the loan immediately or to attempt to reverse
the declaration of default through negotiation or litigation.
DESCRIPTION OF WARRANTS
The following description,
together with the additional information we may include in the applicable prospectus supplements and free writing prospectuses
we have authorized for use in connection with a specific offering, summarizes the material terms and provisions of the warrants
that we may offer under this prospectus, which may consist of warrants to purchase common stock, preferred stock or debt securities
and may be issued in one or more series.
Warrants may be issued
independently or together with common stock, preferred stock or debt securities offered by any prospectus supplement, and may be
attached to or separate from those securities. While the terms we have summarized below will apply generally to any warrants that
we may offer under this prospectus, we will describe the particular terms of any series of warrants that we may offer in more detail
in the applicable prospectus supplement and any applicable free writing prospectus we authorize for use in connection with the
specific offering. The terms of any warrants offered under a prospectus supplement may differ from the terms described below.
We will file as exhibits
to the registration statement of which this prospectus is a part, or will incorporate by reference from reports that we file with
the SEC, the form of warrant agreement, if any, including a form of warrant certificate, that describes the terms of the particular
series of warrants we are offering. The following summaries of material provisions of the warrants and the warrant agreements are
subject to, and qualified in their entirety by reference to, all the provisions of the warrant agreement and warrant certificate
applicable to the particular series of warrants that we may offer under this prospectus. We urge you to read the applicable prospectus
supplements related to the particular series of warrants that we may offer under this prospectus, as well as any related free writing
prospectuses we have authorized for use in connection with a specific offering, and the complete warrant agreements and warrant
certificates that contain the terms of the warrants.
General Matters
We will describe in
the applicable prospectus supplement the terms relating to a series of warrants being offered, including:
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the title of such securities;
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the offering price or prices and aggregate number of warrants offered;
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the currency or currencies for which the warrants may be purchased;
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if applicable, the designation and terms of the securities with which the warrants are issued and
the number of warrants issued with each such security or each principal amount of such security;
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if applicable, the date on and after which the warrants and the related securities will be separately
transferable;
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if applicable, the minimum or maximum amount of such warrants which may be exercised at any one
time;
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in the case of warrants to purchase debt securities, the principal amount of debt securities purchasable
upon exercise of one warrant and the price at which, and currency in which, this principal amount of debt securities may be purchased
upon such exercise;
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in the case of warrants to purchase common stock or preferred stock, the number of shares of common
stock or preferred stock, as the case may be, purchasable upon the exercise of one warrant and the price at which, and the currency
in which, these shares may be purchased upon such exercise;
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the effect of any merger, consolidation, sale or other disposition of our business on the warrant
agreements and the warrants;
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the terms of any rights to redeem or call the warrants;
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the terms of any rights to force the exercise of the warrants;
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any provisions for changes to or adjustments in the exercise price or number of securities issuable
upon exercise of the warrants;
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the dates on which the right to exercise the warrants will commence and expire;
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the manner in which the warrant agreements and warrants may be modified;
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a discussion of any material or special United States federal income tax consequences of holding
or exercising the warrants;
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the terms of the securities issuable upon exercise of the warrants; and
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any other specific terms, preferences, rights or limitations of or restrictions on the warrants.
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Before exercising
their warrants, holders of warrants will not have any of the rights of holders of the securities purchasable upon such exercise,
including:
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in the case of warrants to purchase debt securities, the right to receive payments of principal
of, or premium, if any, or interest on, the debt securities purchasable upon exercise or to enforce covenants in the applicable
indenture; or
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in the case of warrants to purchase common stock or preferred stock, the right to receive dividends,
if any, or, payments upon our liquidation, dissolution or winding up or to exercise voting rights, if any.
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Exercise of Warrants
Each warrant will
entitle the holder to purchase the securities that we specify in the applicable prospectus supplement at the exercise price that
we describe in the applicable prospectus supplement. Unless we otherwise specify in the applicable prospectus supplement, holders
of the warrants may exercise the warrants at any time up to the specified time on the expiration date that we set forth in the
applicable prospectus supplement. After the close of business on the expiration date, unexercised warrants will become void.
Unless we otherwise
specify in the applicable prospectus supplement, holders of the warrants may exercise the warrants by delivering the warrant certificate
representing the warrants to be exercised together with specified information, and paying the required amount to the warrant agent
in immediately available funds, as provided in the applicable prospectus supplement. We will set forth on the reverse side of the
warrant certificate and in the applicable prospectus supplement the information that the holder of the warrant will be required
to deliver to the warrant agent in connection with the exercise of the warrant.
Upon receipt of the
required payment and the warrant certificate properly completed and duly executed at the corporate trust office of the warrant
agent or any other office indicated in the applicable prospectus supplement, we will issue and deliver the securities purchasable
upon such exercise. If fewer than all of the warrants represented by the warrant certificate are exercised, then we will issue
a new warrant certificate for the remaining amount of warrants. If we so indicate in the applicable prospectus supplement, holders
of the warrants may surrender securities as all or part of the exercise price for warrants.
Governing Law
Unless we provide
otherwise in the applicable prospectus supplement, the warrants and warrant agreements, and any claim, controversy or dispute arising
under or related to the warrants or warrant agreements, will be governed by and construed in accordance with the laws of the State
of New York.
Enforceability of Rights By Holders of Warrants
Each warrant agent
will act solely as our agent under the applicable warrant agreement and will not assume any obligation or relationship of agency
or trust with any holder of any warrant. A single bank or trust company may act as warrant agent for more than one issue of warrants.
A warrant agent will have no duty or responsibility in case of any default by us under the applicable warrant agreement or warrant,
including any duty or responsibility to initiate any proceedings at law or otherwise, or to make any demand upon us. Any holder
of a warrant may, without the consent of the related warrant agent or the holder of any other warrant, enforce by appropriate legal
action its right to exercise, and receive the securities purchasable upon exercise of, its warrants.
Warrant Agreement Will Not Be Qualified Under Trust Indenture
Act
No warrant agreement
will be qualified as an indenture, and no warrant agent will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of warrants issued under a warrant agreement will not have the protection of the Trust Indenture Act with respect
to their warrants.
Calculation Agent
Calculations relating
to warrants may be made by a calculation agent, an institution that we appoint as our agent for this purpose. The prospectus supplement
for a particular warrant will name the institution that we have appointed to act as the calculation agent for that warrant as of
the original issue date for that warrant. We may appoint a different institution to serve as calculation agent from time to time
after the original issue date without the consent or notification of the holders.
The calculation agent’s
determination of any amount of money payable or securities deliverable with respect to a warrant will be final and binding in the
absence of manifest error.
Outstanding Warrants
As of November 1,
2017, warrants to purchase 5,932,998 shares of common stock with a weighted-average exercise price of $7.80 per share were outstanding.
All of our outstanding warrants are currently exercisable, except to the extent that certain of them may be subject to a blocker
provision, which restricts the exercise of a warrant if, as a result of such exercise, the warrant holder, together with its affiliates
and any other person whose beneficial ownership of common stock would be aggregated with the warrant holder’s for purposes
of Section 13(d) of the Exchange Act, would beneficially own in excess of 19.99% or 19.9% of our then issued and outstanding shares
of common stock (including the shares of common stock issuable upon such exercise), as such percentage ownership is determined
in accordance with the terms of such warrant. All of our outstanding warrants contain provisions for the adjustment of the exercise
price in the event of stock dividends, stock splits or similar transactions. In addition, certain of the warrants contain a “cashless
exercise” feature that allows the holders thereof to exercise the warrants without a cash payment to us under certain circumstances.
DESCRIPTION OF UNITS
We may issue units
consisting of any combination of the other types of securities offered under this prospectus in one or more series. We may evidence
each series of units by unit certificates that we will issue under a separate agreement. We may enter into unit agreements with
a unit agent. Each unit agent will be a bank or trust company that we select. We will indicate the name and address of the unit
agent in the applicable prospectus supplement relating to a particular series of units.
The following description,
together with the additional information included in the applicable prospectus supplement, summarizes the general features of the
units that we may offer under this prospectus. You should read any prospectus supplement and any free writing prospectus we authorize
for use in connection with a specific offering of units, as well as the complete unit agreements that contain the terms of the
units. Specific unit agreements will contain additional important terms and provisions and we will file as an exhibit to the registration
statement of which this prospectus is a part, or will incorporate by reference from another report that we file with the SEC, the
form of each unit agreement relating to units offered under this prospectus.
If we offer any units,
certain terms of that series of units will be described in the applicable prospectus supplement, including, without limitation,
the following, as applicable:
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the title of the series of units;
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identification and description of the separate constituent securities comprising the units;
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the price or prices at which the units will be issued;
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the date, if any, on and after which the constituent securities comprising the units will be separately
transferable;
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a discussion of certain U.S. federal income tax considerations applicable to the units; and
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any other terms of the units and their constituent securities.
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LEGAL OWNERSHIP OF SECURITIES
We can issue securities
in registered form or in the form of one or more global securities. We describe global securities in greater detail below. We refer
to those persons who have securities registered in their own names on the books that we or any applicable trustee or depositary
maintain for this purpose as the “holders” of those securities. These persons are the legal holders of the securities.
We refer to those persons who, indirectly through others, own beneficial interests in securities that are not registered in their
own names, as “indirect holders” of those securities. As we discuss below, indirect holders are not legal holders,
and investors in securities issued in book-entry form or in street name will be indirect holders.
Book-Entry Holders
We may issue securities
in book-entry form only, as we will specify in the applicable prospectus supplement. This means securities may be represented by
one or more global securities registered in the name of a financial institution that holds them as depositary on behalf of other
financial institutions that participate in the depositary’s book-entry system. These participating institutions, which are
referred to as participants, in turn, hold beneficial interests in the securities on behalf of themselves or their customers.
Only the person in
whose name a security is registered is recognized as the holder of that security. Global securities will be registered in the name
of the depositary or its participants. Consequently, for global securities, we will recognize only the depositary as the holder
of the securities, and we will make all payments on the securities to the depositary. The depositary passes along the payments
it receives to its participants, which in turn pass the payments along to their customers who are the beneficial owners. The depositary
and its participants do so under agreements they have made with one another or with their customers; they are not obligated to
do so under the terms of the securities.
As a result, investors
in a global security will not own securities directly. Instead, they will own beneficial interests in a global security, through
a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds an interest
through a participant. As long as the securities are issued in global form, investors will be indirect holders, and not legal holders,
of the securities.
Street Name Holders
We may terminate a
global security in certain situations, as described under “-Special Situations When a Global Security Will Be Terminated”,
or issue securities that are not issued in global form. In these cases, investors may choose to hold their securities in their
own names or in “street name”. Securities held by an investor in street name would be registered in the name of a bank,
broker or other financial institution that the investor chooses, and the investor would hold only a beneficial interest in those
securities through an account he or she maintains at that institution.
For securities held
in street name, we or any applicable trustee or depositary will recognize only the intermediary banks, brokers and other financial
institutions in whose names the securities are registered as the holders of those securities, and we or any such trustee or depositary
will make all payments on those securities to them. These institutions pass along the payments they receive to their customers
who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required
to do so. Investors who hold securities in street name will be indirect holders, not holders, of those securities.
Legal Holders
Our obligations, as
well as the obligations of any applicable trustee or third party employed by us or a trustee, run only to the legal holders of
the securities. We do not have obligations to investors who hold beneficial interests in global securities, in street name or by
any other indirect means. This will be the case whether an investor chooses to be an indirect holder of a security or has no choice
because we are issuing the securities only in global form.
For example, once
we make a payment or give a notice to the legal holder, we have no further responsibility for the payment or notice even if that
legal holder is required, under agreements with its participants or customers or by law, to pass the payment or notice along to
the indirect holders but does not do so. Similarly, we may want to obtain the approval of the holders to amend an indenture, to
relieve us of the consequences of a default or of our obligation to comply with a particular provision of an indenture, or for
other purposes. In such an event, we would seek approval only from the legal holders, and not the indirect holders, of the securities.
Whether and how the legal holders contact the indirect holders is up to the legal holders.
Special Considerations for Indirect Holders
If you hold securities
through a bank, broker or other financial institution, either in book-entry form because the securities are represented by one
or more global securities or in street name, you should check with your own institution to find out:
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how it handles securities payments and notices;
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whether it imposes fees or charges;
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how it would handle a request for the holders’ consent, if ever required;
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whether and how you can instruct it to send you securities registered in your own name so you can
be a holder, if that is permitted in the future;
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how it would exercise rights under the securities if there were a default or other event triggering
the need for holders to act to protect their interests; and
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if the securities are in book-entry form, how the depositary’s rules and procedures will
affect these matters.
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Global Securities
A global security
is a security that represents one or any other number of individual securities held by a depositary. Generally, all securities
represented by the same global securities will have the same terms.
Each security issued
in book-entry form will be represented by a global security that we issue to, deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary.
Unless we specify otherwise in the applicable prospectus supplement, The Depository Trust Company, New York, New York, known as
DTC, will be the depositary for all securities issued in book-entry form.
A global security
may not be transferred to or registered in the name of anyone other than the depositary, its nominee or a successor depositary,
unless special termination situations arise. We describe those situations below under “-Special Situations When a Global
Security Will Be Terminated”. As a result of these arrangements, the depositary, or its nominee, will be the sole registered
owner and legal holder of all securities represented by a global security, and investors will be permitted to own only beneficial
interests in a global security. Beneficial interests must be held by means of an account with a broker, bank or other financial
institution that in turn has an account with the depositary or with another institution that does. Thus, an investor whose security
is represented by a global security will not be a legal holder of the security, but only an indirect holder of a beneficial interest
in the global security.
If the prospectus
supplement for a particular security indicates that the security will be issued as a global security, then the security will be
represented by a global security at all times unless and until the global security is terminated. If termination occurs, we may
issue the securities through another book-entry clearing system or decide that the securities may no longer be held through any
book-entry clearing system.
Special Considerations for Global Securities
As an indirect holder,
an investor’s rights relating to a global security will be governed by the account rules of the investor’s financial
institution and of the depositary, as well as general laws relating to securities transfers. We do not recognize an indirect holder
as a holder of securities and instead deal only with the depositary that holds the global security.
If securities are
issued only as global securities, an investor should be aware of the following:
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an investor cannot cause the securities to be registered in his or her name, and cannot obtain
non-global certificates for his or her interest in the securities, except in the special situations described below;
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an investor will be an indirect holder and must look to his or her own bank or broker for payments
on the securities and protection of his or her legal rights relating to the securities, as described above;
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an investor may not be able to sell interests in the securities to some insurance companies and
to other institutions that are required by law to own their securities in non-book-entry form;
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an investor may not be able to pledge his or her interest in the global security in circumstances
where certificates representing the securities must be delivered to the lender or other beneficiary of the pledge in order for
the pledge to be effective;
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the depositary’s policies, which may change from time to time, will govern payments, transfers,
exchanges and other matters relating to an investor’s interest in the global security;
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we and any applicable trustee have no responsibility for any aspect of the depositary’s actions
or for its records of ownership interests in the global security, nor will we or any applicable trustee supervise the depositary
in any way;
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the depositary may, and we understand that DTC will, require that those who purchase and sell interests
in the global security within its book-entry system use immediately available funds, and your broker or bank may require you to
do the same; and
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financial institutions that participate in the depositary’s book-entry system, and through
which an investor holds its interest in the global security, may also have their own policies affecting payments, notices and other
matters relating to the securities.
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There may be more
than one financial intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for the actions
of any of those intermediaries.
Special Situations When a Global Security Will Be Terminated
In a few special situations
described below, a global security will terminate and interests in it will be exchanged for physical certificates representing
those interests. After that exchange, the choice of whether to hold securities directly or in street name will be up to the investor.
Investors must consult their own banks or brokers to find out how to have their interests in securities transferred to their own
names, so that they will be direct holders. The rights of holders and street name investors are described above.
A global security
will terminate when the following special situations occur:
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if the depositary notifies us that it is unwilling, unable or no longer qualified to continue as
depositary for that global security and we do not appoint another institution to act as depositary within 90 days;
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if we notify any applicable trustee that we wish to terminate that global security; or
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if if an event of default has occurred with regard to securities represented by that global security
and has not been cured or waived.
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The applicable prospectus
supplement may also list additional situations for terminating a global security that would apply only to the particular series
of securities covered by the prospectus supplement. When a global security terminates, the depositary, and neither we nor any applicable
trustee, is responsible for deciding the names of the institutions that will be the initial direct holders.
PLAN OF DISTRIBUTION
We may sell the securities
from time to time pursuant to underwritten public offerings, direct sales to the public, “at the market” offerings,
negotiated transactions, block trades or a combination of these methods. We may sell the securities to or through underwriters
or dealers, through agents, or directly to one or more purchasers. We may distribute securities from time to time in one or more
transactions:
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at a fixed price or prices, which may be changed;
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at market prices prevailing at the time of sale;
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at prices related to such prevailing market prices; or
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A prospectus supplement
or supplements (and any related free writing prospectus that we may have authorized for use in connection with a specific offering)
will describe the terms of the offering of the securities, including, to the extent applicable:
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the name or names of the underwriters, if any;
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the purchase price of the securities or other consideration therefor, and the proceeds, if any,
we will receive from the sale;
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any over-allotment options under which underwriters may purchase additional securities from us;
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any agency fees or underwriting discounts and other items constituting agents’ or underwriters’
compensation;
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any public offering price;
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any discounts or concessions allowed or re-allowed or paid to dealers; and
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any securities exchange or market on which the securities may be listed.
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Only underwriters
named in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement.
If underwriters are
used in the sale, they will acquire the securities for their own account and may resell the securities from time to time in one
or more transactions at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the
underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting agreement. We
may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Subject to certain conditions, the underwriters will be obligated to purchase all of the securities offered
by the prospectus supplement, other than securities covered by any over-allotment option. Any public offering price and any discounts
or concessions allowed or re-allowed or paid to dealers may change from time to time. We may use underwriters with whom we have
a material relationship. We will describe in the prospectus supplement, naming the underwriter, the nature of any such relationship.
We may sell securities
directly or through agents we designate from time to time. We will name any agent involved in the offering and sale of securities
and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement
states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
We may authorize agents
or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at the public offering
price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified
date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation of these
contracts in the prospectus supplement.
We may provide agents
and underwriters with indemnification against civil liabilities, including liabilities under the Securities Act, or contribution
with respect to payments that the agents or underwriters may make with respect to these liabilities. Agents and underwriters may
engage in transactions with, or perform services for, us in the ordinary course of business.
All securities we
may offer, other than common stock, will be new issues of securities with no established trading market. Any underwriters may make
a market in these securities, but will not be obligated to do so and may discontinue any market making at any time without notice.
We cannot guarantee the liquidity of the trading markets for any securities.
Any underwriter may
engage in over-allotment, stabilizing transactions, short-covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Over-allotment involves sales in excess of the offering
size, which create a short position. Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing
bids do not exceed a specified maximum price. Syndicate-covering or other short-covering transactions involve purchases of the
securities, either through exercise of the over-allotment option or in the open market after the distribution is completed, to
cover short positions. Penalty bids permit the underwriters to reclaim a selling concession from a dealer when the securities originally
sold by the dealer are purchased in a stabilizing or covering transaction to cover short positions. Those activities may cause
the price of the securities to be higher than it would otherwise be. If commenced, the underwriters may discontinue any of the
activities at any time.
Any underwriters that
are qualified market makers on the Nasdaq Capital Market may engage in passive market making transactions in the common stock on
the Nasdaq Capital Market in accordance with Regulation M under the Exchange Act, during the business day prior to the pricing
of the offering, before the commencement of offers or sales of the common stock. Passive market makers must comply with applicable
volume and price limitations and must be identified as passive market makers. In general, a passive market maker must display its
bid at a price not in excess of the highest independent bid for such security; if all independent bids are lowered below the passive
market maker’s bid, however, the passive market maker’s bid must then be lowered when certain purchase limits are exceeded.
Passive market making may stabilize the market price of the securities at a level above that which might otherwise prevail in the
open market and, if commenced, may be discontinued at any time.
In compliance with
guidelines of the Financial Industry Regulatory Authority, or FINRA, the maximum consideration or discount to be received by any
FINRA member or independent broker dealer may not exceed 8% of the aggregate amount of the securities offered pursuant to this
prospectus and the applicable prospectus supplement.
LEGAL MATTERS
Unless otherwise indicated
in the applicable prospectus supplement, the validity of the securities offered by this prospectus, and any supplement thereto,
will be passed upon for us by Paul Hastings LLP, Palo Alto, California.
EXPERTS
The consolidated financial
statements as of and for the year ended December 31, 2016, and the related financial statement schedule, incorporated in this prospectus
by reference from the Annual Report on Form 10-K for the year ended December 31, 2016 of Sorrento Therapeutics, Inc. and subsidiaries,
or the Company, and the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016
have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports (which
reports (1) express an unqualified opinion on the consolidated financial statements and financial statement schedule and include
an explanatory paragraph referring to the Company’s ability to continue as a going concern and (2) express an adverse opinion
on the effectiveness of the Company’s internal control over financial reporting because of a material weakness), which are
incorporated herein by reference. Such consolidated financial statements and financial statement schedule have been so incorporated
in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.
The consolidated financial
statements of Sorrento Therapeutics, Inc. for each of the years in the two-year period ended December 31, 2015, incorporated by
reference in this prospectus have been audited by Mayer Hoffman McCann P.C., an independent registered public accounting firm,
as stated in their reports incorporated by reference herein, given on the authority of said firm as experts in auditing and accounting.
The financial statements
of Scilex Pharmaceuticals Inc. as of December 31, 2015 and 2014 and for each of the years then ended incorporated by reference
in this prospectus have been so included in reliance on the report of BDO USA, LLP, independent auditors (the report on the financial
statements contains an emphasis of matter paragraph regarding Scilex Pharmaceuticals Inc.’s ability to continue as a going
concern) incorporated by reference herein, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting
company and file annual, quarterly and current reports, proxy statements and other information with the SEC. We have filed with
the SEC a registration statement on Form S-3 under the Securities Act with respect to the securities being offered under this prospectus.
This prospectus does not contain all of the information set forth in the registration statement and the exhibits to the registration
statement. For further information with respect to us and the securities being offered under this prospectus, we refer you to the
registration statement and the exhibits and schedules filed as a part of the registration statement. You may read and copy the
registration statement, as well as our reports, proxy statements and other information, at the SEC’s Public Reference Room
at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information about the operation of
the Public Reference Room. The SEC maintains an Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC, including Sorrento Therapeutics, Inc. The SEC’s
Internet site can be found at http://www.sec.gov .
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us
to “incorporate by reference” information into this prospectus, which means that we can disclose important information
to you by referring you to another document filed separately with the SEC. The documents incorporated by reference into this prospectus
contain important information that you should read about us.
The following documents
are incorporated by reference into this prospectus:
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Our Current Reports on Form 8-K filed with the SEC on January 5, 2017 (other than information disclosed
under Item 7.01 thereof), March 20, 2017, March 21, 2017, March 24, 2017, April 13, 2017, April 19, 2017, April 28, 2017, May 4, 2017, June 1, 2017, June 13, 2017, June 29, 2017 (other than information disclosed under Item 7.01 thereof), July 13, 2017, July 31, 2017, August 21, 2017, October 2, 2017, October 6, 2017 and November 9, 2017;
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We also incorporate
by reference any future filings (other than current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits filed
on such form that are related to such items unless such Form 8-K expressly provides to the contrary) made with the SEC pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, including those made after the date of the initial filing of the registration
statement of which this prospectus is a part and prior to effectiveness of such registration statement, until we file a post-effective
amendment that indicates the termination of the offering of the securities made by this prospectus and will become a part of this
prospectus from the respective dates that such documents are filed with the SEC. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes hereof
or of the related prospectus supplement to the extent that a statement contained herein or in any other subsequently filed document
which is also incorporated or deemed to be incorporated herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
Documents incorporated
by reference are available from us, without charge. You may obtain documents incorporated by reference in this prospectus by requesting
them in writing or by telephone at the following address:
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Sorrento Therapeutics, Inc.
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4955 Directors Place
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San Diego, CA 92121
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Attn: Corporate Secretary
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Phone: (858) 203-4100
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Up to $75,000,000 of Shares of Common
Stock
plus 897,308 Commitment Shares
Prospectus
Supplement
February
10, 2020
Sorrento Therapeutics (NASDAQ:SRNE)
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