What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-11 compared with 2022-11-09 · 187 added, 178 removed, 281 unchanged (57% of the section changed)

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• our ability to develop next-generation therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases;

• our ability to implement and support our SARS-CoV-2 vaccine and therapeutic programs;

• any impact of the coronavirus pandemic, or responses to the pandemic, on our business, clinical trials or personnel;

• our ability to obtain funding for our operations, including funding necessary to complete further development and any commercialization of our product candidates;

• our expectations regarding the potential benefits of our strategy and technology;

• our expectations regarding the operation of our product candidates and related benefits;

• our expectations regarding the operation and effectiveness of our product candidates and related benefits;

• our ability to utilize multiple modes to induce cell death;

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• our beliefs regarding the success, cost and timing of our product candidate development activities and current and future clinical trials and studies, including study design and the enrollment of patients;

• the timing of the development and commercialization of our product candidates;

• our expectations regarding our ability to utilize the Phase 1/2 aNK and haNK ® clinical trials data to support the development of our product candidates, including our haNK, taNK, t‑haNK ™ , MSC, and M-ceNK ™ product candidates;

• our expectations regarding the development, application, commercialization, marketing, prospects and use generally of our product candidates, including Anktiva (N-803), self-amplifying RNA (saRNA), hAd5 and yeast constructs, recombinant sub-unit proteins, toll-like receptor-activating adjuvants, and aldoxorubicin;

• the timing or likelihood of regulatory submissions or other actions and related regulatory authority responses and approvals, including any planned investigational new drug (IND), BLA or New Drug Application (NDA) submissions to the FDA, including, without limitation, the progress of our BLA submission for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, submitted to the FDA in May 2022 or the pursuit of accelerated regulatory approval pathways or orphan drug status and Breakthrough Therapy designations for applicable product candidates;

• the timing or likelihood of regulatory filings or other actions and related regulatory authority responses, including any planned investigational new drug (IND), BLA or New Drug Application (NDA) filings or pursuit of accelerated regulatory approval pathways or orphan drug status and Breakthrough Therapy designations;

• our ability to implement and support our SARS-CoV-2 (COVID‑19) vaccine and therapeutic programs;

• our ability to implement an integrated discovery ecosystem and the operation of that planned ecosystem, including being able to regularly add neoepitopes and subsequently formulate new product candidates;

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• our expectations regarding the ease of administration associated with our product candidates;

• the ability to transition our clinical trials at the Clinic to a new structure on the anticipated timeline, if at all;

• our ability to finalize and execute definitive agreements with third parties with whom we have entered into term sheets or reached agreements in principle on various potential transactions;

• our expectations regarding patient compatibility associated with our product candidates;

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• our expectations regarding the timing of enrollment and submission of our clinical trials, and protocols related to such trials;

• our ability to produce an antibody cytokine fusion protein, a DNA, RNA, or recombinant protein vaccine, a toll-like receptor-activating adjuvant, an NK-cell therapy, or a damage-associated molecular patterns (DAMP) inducer therapy;

• our ability to produce an antibody cytokine fusion protein, a DNA, RNA, or recombinant protein vaccine, a toll-like receptor-activating adjuvant, an NK-cell or T-cell therapy, or a damage-associated molecular patterns (DAMP) inducer therapy;

• our beliefs regarding the potential manufacturing and distribution benefits associated with our product candidates, and our ability to scale up the production of our product candidates;

• our plans regarding our manufacturing facilities and our belief that our manufacturing is capable of being conducted in‑house;

• our belief in the potential of our antibody cytokine fusion proteins, DNA, RNA or recombinant protein vaccines, toll-like receptor-activating adjuvants, NK-cell therapy, or DAMP inducer platforms, and the fact that our business is based upon the success individually and collectively of these platforms;

• our belief regarding the magnitude or duration for additional clinical testing of our antibody cytokine fusion proteins, DNA, RNA or recombinant protein vaccines, toll-like receptor-activating adjuvants, NK-cell therapy, or DAMP inducers along with other product candidate families;

• our belief in the potential of our antibody cytokine fusion proteins, DNA, RNA or recombinant protein vaccines, toll-like receptor-activating adjuvants, NK-cell therapies, or DAMP inducer platforms, and the fact that our business is based upon the success individually and collectively of these platforms;

• our belief regarding the magnitude or duration for additional clinical testing of our antibody cytokine fusion proteins, DNA, RNA or recombinant protein vaccines, toll-like receptor-activating adjuvants, NK-cell therapies, or DAMP inducers along with other product candidate families;

• even if we successfully develop and commercialize specific product candidates like our N-803 or PD-L1 t‑haNK, our ability to develop and commercialize our other product candidates either alone or in combination with other therapeutic agents;

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• the accuracy of our estimates regarding our future revenue, as well as our future operating expenses, capital requirements and needs for additional financing;

• our ability to obtain funding for our operations, including funding necessary to complete further development and any commercialization of our product candidates;

• our ability to obtain, maintain, protect and enforce intellectual property protection for our product candidates and technology and not infringe upon, misappropriate or otherwise violate the intellectual property of others;

• the terms and conditions of licenses granted to us and our ability to license additional intellectual property relating to our product candidates and technology;

• the impact on us, if any, if the CVRs held by former Altor stockholders become due and payable in accordance with their terms;

• regulatory developments in the U.S.

and foreign countries;

• the timing of the development and commercialization of our product candidates.

• the impact on us, if any, if the contingent value rights (CVRs) held by former Altor BioScience Corporation (Altor) stockholders become due and payable in accordance with their terms;

• regulatory developments in the United States (U.S.) and foreign countries;

• any impact of the coronavirus pandemic, or responses to the pandemic, on our business, clinical trials or personnel.

Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” or similar expressions and the negatives of those terms.

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Anktiva, ceNK, Conkwest, GlobeImmune, GlobeImmune (logo), haNK, haNK (Chinese characters), ImmunityBio, NantKwest, NK-92, Outsmart your disease, taNK, Tarmogen, VesAnktiva, and VivaBioCell are trademarks or registered trademarks of ImmunityBio, Inc., its subsidiaries, or its affiliates.

Our product candidates, including N-803, are investigational.

Safety and efficacy have not been established by any agency, including the U.S.

Food and Drug Administration (FDA).

This Quarterly Report on Form 10-Q contains references to our trademarks and trademarks belonging to other entities.

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We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us, by any other companies.

In this Quarterly Report on Form 10-Q, “ImmunityBio,” “the company,” “the combined company,” “we,” “us,” and “our” refer to ImmunityBio, Inc.

In this Quarterly Report on Form 10-Q, “ImmunityBio,” “the company,” “we,” “us,” and “our” refer to ImmunityBio, Inc.

and its subsidiaries.

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We strive to be a vertically-integrated immunotherapy company designing and manufacturing our products so they are more effective, accessible, more conveniently stored, and more easily administered to patients.

Our broad immunotherapy and cell therapy platforms are designed to attack cancer and infectious pathogens by activating both the innate immune system—NK cells, dendritic cells, and macrophages—and the adaptive immune system—B cells and T cells—in an orchestrated manner.

Our broad immunotherapy and cell therapy platforms are designed to attack cancer and infectious pathogens by activating both the innate immune system—natural killer (NK) cells, dendritic cells, and macrophages—and the adaptive immune system—B cells and T cells—in an orchestrated manner.

The goal of this potentially best-in-class approach is to generate immunogenic cell death thereby eliminating rogue cells from the body whether they are cancerous or virally infected.

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These platforms and their associated product candidates are designed to overcome the limitations of the current standards of care in oncology and infectious diseases, such as checkpoint inhibitors and antiretroviral therapies.

We believe that we have established one of the most comprehensive portfolios of immunotherapy and vaccine platforms, which includes:

Our platforms include 9 first-in-human therapeutic agents that are currently being studied in 27 clinical trials—17 of which are in Phase 2 or 3 development—across 13 indications in liquid and solid tumors, including bladder, pancreatic and lung cancers.

These are among the most frequent and lethal cancer types for which there are high failure rates for existing standards of care or, in some cases, no available effective treatment.

In infectious disease, our pipeline currently targets such pathogens as SARS-CoV-2 and HIV.

Our portfolio includes:

Our platforms include 13 novel therapeutic agents either in clinical trials or for which we are developing protocols.

We are currently engaged in 15 active clinical trials involving 10 of these agents.

Seven of these trials are being sponsored by ImmunityBio while the remaining eight are investigator-led studies.

Twelve of these trials are in Phase 2 or 3 development across eleven indications in liquid and solid tumors.

These include bladder, pancreatic, and lung cancers, which are among the most frequent and lethal cancer types, and where there are high failure rates for existing standards of care or no available effective treatment.

In infectious diseases, our pipeline currently targets such pathogens as the novel strain of the coronavirus (SARS-CoV-2) and human immunodeficiency virus (HIV).

We believe SARS-CoV-2 currently lacks a vaccine that provides long-term protection against the virus, particularly its variants, while HIV affects tens of millions of people globally and currently has no known cure.

We believe that our innovative approach to orchestrate and combine therapies for optimal immune system response will become a therapeutic foundation across multiple clinical indications.

We believe that our innovative approach to orchestrate and combine therapies for optimal immune system response will become a therapeutic foundation across multiple indications.

Additionally, we believe that data from multiple clinical trials indicates N-803 has broad potential to enhance the activity of therapeutic monoclonal antibodies (mAbs), including checkpoint inhibitors (e.g., Keytruda), across a wide range of tumor types.

N-803 is currently being studied in 21 clinical trials (both ImmunityBio and investigator-sponsored) across 13 indications.

Although such designations may not lead to a faster development process or regulatory review and may not increase the likelihood that a product candidate will receive approval, Anktiva, ImmunityBio’s novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations from the FDA in combination with BCG for the treatment of patients with BCG -unresponsive NMIBC with CIS with or without Ta or T1 disease .

I n May 2022, we announced the submission of a BLA to the FDA for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease.

In July 2022, we announced the FDA has accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

N-803 is currently being studied in 14 clinical trials (both ImmunityBio and investigator-led) across 11 indications.

Although such designations may not lead to a faster development process or regulatory review and may not increase the likelihood that a product candidate will receive approval, Anktiva, ImmunityBio’s novel antibody cytokine fusion protein, has received Breakthrough Therapy and Fast Track designations from the FDA in combination with bacillus Calmette- Guérin (BCG) for the treatment of patients with BCG -unresponsive non-muscle invasive bladder cancer (NMIBC) with carcinoma in situ (CIS) with or without Ta or T1 disease.

In May 2022, we announced the submission of a BLA to the FDA for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease .

In July 2022, we announced that the FDA had accepted our BLA for review and set a target Prescription Drug User Fee Act (PDUFA) action date of May 23, 2023.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA, as described in greater detail in — Subsequent Events below.

It is unclear when the FDA will approve our BLA, if at all.

We have established GMP manufacturing capacity at scale with cutting-edge cell manufacturing expertise and ready-to-scale facilities, as well as extensive and seasoned R&D, clinical trial, and regulatory operations, and development teams.

On December 21, 2020 , NantKwest and NantCell entered into the Merger Agreement pursuant to which NantKwest and NantCell agreed to combine their businesses.

The Merger Agreement provided that a wholly-owned subsidiary of the company would merge with and into NantCell, with NantCell surviving the Merger as a wholly-owned subsidiary of the company.

On March 9, 2021 , we completed the Merger pursuant to the terms of the Merger Agreement.

Under the terms of the Merger Agreement, at the Effective Time, each share of NantCell common stock , par value $0.001 per share, issued and outstanding immediately prior to the Effective Time, subject to certain exceptions as set forth in the Merger Agreement, was converted automatically into a right to receive 0.8190 newly issued shares of Company Common Stock, with cash paid in lieu of any fractional shares.

At the Effective Time, each share of the company’s common stock issued and outstanding immediately prior to the Effective Time, remained an issued and outstanding share of the combined company.

At the Effective Time, each outstanding option, RSU or warrant to purchase NantCell common stock was converted using the Exchange Ratio into an option, RSU or warrant, respectively, on the same terms and conditions immediately prior to the Effective Time, to purchase shares of Company Common Stock.

Immediately following the Effective Time, the former stockholders of NantCell held approximately 71.5% of the outstanding shares of Company Common Stock and the stockholders of NantKwest as of immediately prior to the Merger held approximately 28.5% of the outstanding shares of Company Common Stock.

As a result of the Merger and immediately following the Effective Time, Dr.

Patrick Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer, and his affiliates beneficially owned, in the aggregate, approximately 81.8% of the outstanding shares of Company Common Stock.

Following the consummation of the Merger, the symbol for shares of the company’s common stock was changed to “IBRX.”

Accounting Treatment of the Merger

The Merger represents a business combination pursuant to FASB ASC Topic 805-50, which is accounted for as a transaction between entities under common control as Dr.

Soon‑Shiong and his affiliates were the controlling stockholders of both the company and NantCell for all of the periods presented in this report.

As a result, all of the assets and liabilities of NantCell were combined with ours at their historical carrying amounts on the closing date of the Merger.

We have recast our prior period financial statements to reflect the conveyance of NantCell’s common shares as if the Merger had occurred as of the earliest date of the condensed consolidated financial statements presented in Item 1.

“Financial Statements” of this Quarterly Report on Form 10‑Q.

All material intercompany accounts and transactions have been eliminated in consolidation.

COVID-19 Pandemic

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We have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product candidates that are under development.

We have incurred net losses in each year since our inception and, as of September 30, 2022, we had an accumulated deficit of $2.3 billion.

Our net losses attributable to ImmunityBio common stockholders were $308.4 million and $255.5 million for the nine months ended September 30, 2022 and 2021, respectively.

We have incurred net losses in each year since our inception and, as of March 31, 2023, we had an accumulated deficit of $2.5 billion.

Our net losses attributable to ImmunityBio common stockholders were $116.3 million and $102.8 million for the three months ended March 31, 2023 and 2022, respectively.

Substantially all of our net losses resulted principally from costs incurred in connection with our ongoing clinical trials and operations, our research and development programs, and from selling, general and administrative costs associated with our operations, including stock-based compensation expense.

As of September 30, 2022, we had 760 employees.

As of March 31, 2023, we had 703 employees.

Personnel of related companies who provide corporate, general and administrative, certain research and development, and other support services under our shared services agreement with NantWorks are not included in this number.

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We believe we are well positioned to become a leader in immunotherapy due to our broad and vertically-integrated platforms and through complementary strategic partnerships.

We believe that our innovative approach to orchestrate and combine therapies for optimal immune system response will become a therapeutic foundation across multiple clinical indications.

We believe that our innovative approach to orchestrate and combine therapies for optimal immune system response will become a therapeutic foundation across multiple indications.

Additionally, we believe that data from multiple clinical trials indicates N-803 has broad potential to enhance the activity of therapeutic mAbs, including checkpoint inhibitors (e.g., Keytruda), across a wide range of tumor types.

N-803 is currently being studied in 21 clinical trials (both ImmunityBio and investigator-sponsored) across 13 indications.

N-803 is currently being studied in 14 clinical trials (both ImmunityBio and investigator-led) across 11 indications.

We may also enter into supply arrangements for various investigational agents to be used in our clinical trials.

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“ Business—Collaboration and License Agreements ”, of our Annual Report on Form 10-K filed with the SEC on March 1, 2023 for a more detailed discussion regarding our collaboration and license agreements.

The company was previously party to a term sheet with EnGeneIC executed during the fourth quarter of 2021 for an exclusive, worldwide license to develop, manufacture and commercialize their patented endosomal delivery vector (EDV) nanocell technology as a single agent in certain cancer fields and with respect to the treatment and prevention of COVID-19 and in combination with our COVID-19 vaccine and anti-cancer drugs in a more broadly defined field of use.

However, prior to the execution of definitive agreements, the parties recently decided not to pursue the transaction.

Agreements with Related Parties

Our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, founded and has a controlling interest in NantWorks, which is a collection of companies in the healthcare and technology space.

We have entered into arrangements with NantWorks, and certain affiliates of NantWorks, to facilitate the development of new immunotherapies for our product pipeline.

We have entered into arrangements with NantWorks, and certain affiliates of NantWorks.

Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Executive Chairman and Global Chief Scientific and Medical Officer.

Related-Party Debt

The following description of the company’s related-party promissory notes does not purport to be complete and is qualified in its entirety by reference to the full text of the notes, copies of which are filed in Part II, Item 6.

The following description of the company’s related-party promissory note does not purport to be complete and is qualified in its entirety by reference to the full text of the note, a copy of which is incorporated by reference in Part II, Item 6.

“ Exhibits” of this Quarterly Report on Form 10-Q.

$125.0 million Variable-Rate Promissory Note

On August 31, 2022, the company executed a $125.0 million promissory note with Nant Capital that bears interest at Term SOFR plus 8.0% per annum.

The accrued interest is payable quarterly on the last business day of March, June, September and December, commencing on September 30, 2022.

The outstanding principal amount and any accrued and unpaid interest are due on December 31, 2023.

The company may prepay the outstanding principal amount, together with any accrued interest at any time, in whole or in part, without premium or penalty.

The company received net proceeds of $124.4 million, net of a $0.6 million origination fee paid to the lender, which the company intends to use for commercialization efforts, clinical trials, working capital and general corporate purposes.

$300.0 million Variable-Rate Promissory Note

As of September 30, 2022, the company has a $300.0 million variable-rate promissory note with Nant Capital.

On August 31, 2022, the terms of this promissory note were amended and restated to extend the maturity date of the loan from December 17, 2022 to December 31, 2023, increase the spread on the loan from Term SOFR plus 5.4% per annum to Term SOFR plus 8.0% per annum, and reset the quarterly interest payment date from the 17th of the month to the last business day of March, June, September and December, commencing on September 30, 2022.

No other material terms or conditions of this variable-rate promissory note were modified as part of this amendment and restatement.

In the event of a default on the loan (as defined in the promissory note), including if the company does not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into shares of the company’s common stock at a price of $5.67 per share.

There can be no assurance that the company can refinance the variable-rate promissory notes described above or what terms will be available in the market at the time of refinancing.

Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to the refinanced indebtedness would increase.

These risks could materially adversely affect the company’s financial condition, cash flows and results of operations.

Fixed-Rate Convertible Promissory Notes

As of September 30, 2022, the company has outstanding fixed-rate promissory notes held by entities affiliated with Dr.

Soon-Shiong in an aggregate amount of $315.7 million (consisting of principal and accrued and unpaid interest).

These notes bear interest at a per annum rate ranging from 3.0% to 6.0%, provide that the outstanding principal is due and payable on September 30, 2025, and accrued and unpaid interest is payable on either upon maturity or, with respect to one of the notes, on a quarterly basis.

The company may prepay the outstanding amount of any advance under such notes, together with accrued and unpaid interest, at any time, in whole or in part, without premium or penalty, now subject to an advance notice period of at least five business days, during which the lender can convert the amount requested to be prepaid by the company into shares of company common stock, as part of the amendment and restatement described below.

On August 31, 2022, the terms of each fixed-rate promissory note were amended and restated to include a conversion feature that gives each lender the right at any time, including upon notice of prepayment, at its sole option, to convert the entire outstanding principal amount and accrued and unpaid interest due under each note at the time of conversion into shares of the company’s common stock at a price of $5.67 per share.

No other material terms or conditions of these fixed-rate promissory notes were modified as part of these amendments.

Related-Party Convertible Note at Fair Value

On March 31, 2023, the company executed a $30.0 million promissory note with Nant Capital.

This note bears interest at Term SOFR plus 8.0% per annum.

The outstanding principal amount and any accrued and unpaid interest are due on the December 31, 2023 or upon the occurrence and continuation of an Event of Default (as defined in the note).

The interest on this note will be paid on a quarterly basis beginning on June 30, 2023.

The company may prepay the outstanding promissory note, at any time, in whole or in part, without penalty.

The noteholder may convert the balance of the convertible promissory note and accrued interest in whole at their option following the Conversion Price Date, which is the trading day prior to the opening of the next open trading window, as determined by the company’s board of directors in accordance with the company’s Insider Trading Policy.

The conversion price is equal to the greater of (i) the Nasdaq Official Closing Price and (ii) the consolidated closing bid price of the company’s common stock on the Conversion Price Date.

There is no floor on the conversion price for this convertible note, therefore, as of March 31, 2023 we cannot determine the total number of shares issuable upon conversion that may occur in the future.

The company received net proceeds of $29.9 million from this financing, net of a $0.1 million origination fee paid to the lender, which we intend to use, together with other available funds, to progress our pre-commercialization efforts and clinical development programs, fund other research and development activities, for capital expenditures, and for other general corporate purposes.

We may also use a portion of the net proceeds to license intellectual property or to make acquisitions or investments.

The note is accounted for under ASC 825-10-15-4 FVO election.

Under the FVO election, the note is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date.

With each such remeasurement, the note will be adjusted to fair value, with the change in fair value recognized in other income (expense), net , on the condensed consolidated statement of operations.

As of March 31, 2023, we had a balance of $29.9 million in related-party convertible note at fair value , on the condensed consolidated balance sheet related to this note.

Additional Borrowing

On May 9, 2023, the company’s Executive Chairman and Global Chief Scientific and Medical Officer agreed to provide immediate non-convertible debt financing to the company in an amount of $30.0 million, which will be available to the company as soon as the underlying agreements are executed.

See — Subsequent Events below .

See Note 9 , Related-Party Debt, and Note 10 , Related-Party Agreements , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appear in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q for more detailed discussions of our related-party agreements.

Immuno-Oncology Clinic, Inc.

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In 2021, we completed a review of alternative structures that could support our more complex clinical trial requirements and made a decision to explore a potential transition of clinical trials at the Clinic to a new structure (including contracting with a new, non-affiliated professional corporation) to be determined and agreed upon by all parties.

Based on this decision to explore a potential transition, we determined that it was more likely than not that the previously recorded prepaid asset would not result in the collection of fees for services performed by the Clinic as contemplated in the original agreements.

As a result, we wrote down the remaining value of our prepaid asset and recorded approximately $4.4 million in research and development expense , on the condensed consolidated statement of operations for the year ended December 31, 2021 .

For the nine months ended September 30, 2022 and 2021, we incurred $2.0 million and $1.4 million in research and development expense , on the condensed consolidated statements of operations related to clinical trial and transition services provided by the Clinic.

NantWorks, LLC

On May 6, 2022, we amended our facility license agreement with NantWorks to expand the licensed premises to an aggregate total of 46,330 rentable square feet.

23 Alaska, LLC

On May 6, 2022, we entered into a lease agreement with 23 Alaska, LLC for a 47,265 rentable square foot facility located at 2335 Alaska Ave., El Segundo, California, to be used primarily for quality control and process science activities.

557 Doug St, LLC

Effective September 27, 2021, we entered into a lease agreement with Nant Capital under which we leased 557 South Douglas Street in El Segundo, California.

Effective May 31, 2022, we executed a lease termination agreement with Nant Capital under which we received a full refund of the first month’s rent and security deposit totaling $0.2 million that we paid upon execution of the lease.

We continue productive negotiations with potential partners around alternative structures, but there can be no assurance that we will be successful.

For the three months ended March 31, 2023 and 2022 , we incurred $0.6 million and $0.4 million, respectively, in research and development expense , on the condensed consolidated statement of operations related to clinical trial and transition services provided by the Clinic.

See Note 9 , Related-Party Debt, and Note 10 , Related-Party Agreements , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appear in Item 1.

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• facility expenses dedicated to research and development.

We typically use our employee, consultant and infrastructure resources across our development programs.

We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs, other internal costs or external consultant costs to specific product candidates or development programs.

The company classifies its research and development expenses as either external or internal.

The company’s external research and development expenses support its various preclinical and clinical programs.

The company’s internal research and development expenses include payroll and benefits expenses, facilities and equipment expense, and other indirect research and development expenses incurred in support of its research and development activities.

The company’s external and internal resources are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs and are not allocated to specific product candidates or development programs.

We expect our research and development expenses to continue to increase significantly for the foreseeable future as we advance our product candidates through clinical development, including the conduct of our ongoing and any future clinical trials.

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• the duration of patient follow-up;

• the efficacy and safety profile of the product candidate.

• the safety profile and efficacy of the product candidate.

We have only one product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, for which we submitted a BLA to the FDA in May 2022.

In July 2022, we announced the FDA has accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

However, there can be no assurance that our product candidate will be approved for commercial sale by the target PDUFA action date, if ever.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA, as described in greater detail in — Subsequent Events below.

There can be no assurance that our product candidate will be approved for commercial sale by the FDA, if ever.

We do not expect any of our other product candidates to be commercially available for the foreseeable future, if ever.

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Other selling, general and administrative expenses include facility-related costs not otherwise allocated to research and development expense, professional fees for auditing, tax and legal services, advertising costs, expenses associated with strategic business transactions and business development efforts, obtaining and maintaining patents, consulting costs, royalties and licensing costs, and costs of our information systems.

We expect that our selling, general and administrative expenses will increase for the foreseeable future as we expand operations, build out information systems and increase our headcount to support continued research activities and the development of our clinical programs.

We expect that our selling, general and administrative expense will increase for the foreseeable future as we expand operations, build out information systems and increase our headcount to support continued research activities and the development of our clinical programs.

We have incurred and expect that we will continue to incur in the future, additional costs associated with operating as a public company, including costs to comply with stock exchange listing and SEC requirements, future funding efforts, corporate governance, internal controls, investor relations, disclosure and similar requirements applicable to public companies.

Additionally, if and when we believe that a regulatory approval of a product candidate appears likely, we expect to incur significant increases in our selling, general and administrative expenses relating to the sales and marketing of the approved product candidate.

Additionally, if and when we believe that a regulatory approval of a product candidate appears likely, we expect to incur significant increases in our selling, general and administrative expense relating to the sales and marketing of the approved product candidate.

Other Income and Expense

Other income and expense consists primarily of interest income, interest expense, unrealized gains and losses on investments in equity securities and equity method investments, realized gains and losses on both debt and equity securities, and gains and losses on foreign currency transactions.

Other income and expense consists primarily of interest income, interest expense, unrealized gains and losses on investments in equity securities and equity-method investments, realized gains and losses on both debt and equity securities, changes in fair value of warrant liabilities and related-party convertible note payable at fair value, and gains and losses on foreign currency transactions.

We are subject to U.S.

federal income tax, as well as income tax in Italy, South Korea, California and other states.

From inception through September 30, 2022, we have not been required to pay U.S.

federal and state income taxes because of current losses from operations.

From inception through March 31, 2023, we have not been required to pay U.S.

federal and state income taxes because of current and accumulated NOLs.

Discussion of Condensed Consolidated Results of Operations

Comparison of the Three Months Ended September 30, 2022 and 2021

Comparison of the Three Months Ended March 31, 2023 and 2022

Three Months Ended

September 30, $ Change % Change

(Unaudited, $ in thousands)

Revenue $ 118 $ 66 $ 52 79 %

Operating expenses:

Research and development (including amounts

with related parties) 71,612 49,277 22,335 45 %

Selling, general and administrative (including amounts

with related parties) 19,310 29,625 (10,315) (35 %)

Total operating expenses 90,922 78,902 12,020 15 %

Loss from operations (90,804) (78,836) (11,968) 15 %

Other expense, net:

Interest and investment income (loss), net 857 (5,941) 6,798 (114 %)

Interest expense (including amounts with related parties) (16,764) (3,614) (13,150) 364 %

Loss on equity method investment (4,456) — (4,456) N/A

Other income (loss), net (including amounts

with related parties) 6 (38) 44 (116 %)

Total other expense, net (20,357) (9,593) (10,764) 112 %

Loss before income taxes and noncontrolling interests (111,161) (88,429) (22,732) 26 %

Income tax expense — — — N/A

Net loss $ (111,161) $ (88,429) $ (22,732) 26 %

Revenue increased $0.1 million for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The increase was primarily driven by bioreactor revenue received in 2022.

Research and Development Expense

Research and development expense increased $22.3 million during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The increase in research and development expense was driven by $11.8 million of higher drug manufacturing costs, including costs for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, a $6.4 million increase in personnel costs due to increased headcount, a $5.5 million increase in facilities and equipment expense primarily related to the expansion of our manufacturing facilities in California and New York that caused increases in lease expense, a $1.3 million increase in clinical trial costs driven by higher drug costs for our N-803 program, a $0.9 million increase in other operating expenses, primarily related to the impairment write-down of the Dunkirk Facility workforce intangible asset and increased property tax expense, and a $0.5 million increase in regulatory and consulting costs.

These increases were partially offset by a $2.0 million reduction in lab supplies, a $1.1 million reduction of collaboration costs and a $1.0 million decrease in stock-based compensation expense.

We expect our research and development expense to increase significantly for the foreseeable future as we advance our product candidates through clinical development and conduct our ongoing and planned clinical trials.

Selling, General and Administrative Expense

Selling, general and administrative expense decreased $10.3 million during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The reduction in selling, general and administrative expense was primarily driven by a $13.7 million net decline in legal expenses that included litigation-related insurance reimbursements received during the quarter that offset current-period legal expenses, and a $2.2 million decrease in stock-based compensation expense.

These decreases were partially offset by a $4.2 million increase in personnel costs due to higher headcount and increased travel costs, and a $1.4 million increase in other expenses.

Other Expense, Net

Other expense, net increased $10.8 million during the three months ended September 30, 2022, as compared to the three months ended September 30, 2021.

The increase in other expense, net was mainly due to a $13.2 million increase in interest expense driven by higher related-party borrowings and a mortization of related-party notes discounts , and a $4.5 million loss on our equity method investment.

These increases in other expense, net were partially offset by a $6.8 million increase in net unrealized gains related to our marketable equity securities, and a $0.1 million increase in other income, net.

Comparison of the Nine Months Ended September 30, 2022 and 2021

Nine Months Ended

September 30, $ Change % Change

March 31, $ Change % Change

(Unaudited, $ in thousands)

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Loss from operations (111,580) (95,972) (15,608) 16 %

Other expense, net:

Other income (expense), net:

Interest and investment income, net 673 1,666 (993) (60) %

Interest expense (including amounts with related parties) (29,816) (8,491) (21,325) 251 %

Loss on equity method investment (8,553) — (8,553) N/A

Other income, net (including amounts

Loss on equity method investment (2,337) (197) (2,140) 1086 %

Change in fair value of warrant liabilities 27,554 — 27,554 — %

Other loss, net (including amounts

with related parties) (1,077) (4) (1,073) 26825 %

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Net loss $ (116,583) $ (102,998) $ (13,585) 13 %

Revenue decreased $0.4 million for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

The decrease was primarily driven by less bioreactor revenue received in 2022.

Revenue increased $0.3 million for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

The increase was primarily driven by grant revenue received in 2023.

Research and Development Expense

Research and development expense increased $45.9 million during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

The increase in research and development expense was primarily driven by a $17.3 million increase in personnel costs due to increased headcount and the acquisition of the Dunkirk Facility, $16.9 million of higher drug manufacturing costs, including costs for our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, a $14.6 million increase in facilities and equipment expense primarily related to the expansion of our manufacturing facilities in California and New York which caused increases in lease expenses, a $7.8 million increase in regulatory and consulting costs primarily related to the BLA submission of our product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, and a $1.9 million increase in other operating costs.

These increases were partially offset by a $6.2 million decrease in stock-based compensation expense, a $4.0 million reduction in collaboration costs and a $2.4 million reduction in lab supplies.

Research and development expense increased $23.9 million during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

The following table summarizes our research and development expenses for the three months ended March 31, 2023 and 2022, together with the changes in those items (in thousands):

Three Months Ended

2023 2022 $ Change

(Unaudited, $ in thousands)

External research and development expenses $ 34,453 $ 9,964 $ 24,489

Internal research and development expenses:

Personnel-related costs 24,404 23,123 1,281

Equipment, depreciation, and facility costs 13,111 11,836 1,275

Other research and development costs 7,296 10,455 (3,159)

Total internal research and development expenses 44,811 45,414 (603)

Total research and development expenses $ 79,264 $ 55,378 $ 23,886

Research and development expense increased $23.9 million primarily attributable to the following:

• a $24.5 million increase in external research and development expenses that was primarily due to a rise in contract manufacturing organization (CMO) fees and drug materials purchased and used in manufacturing, an increase in regulatory and compliance costs resulting from the BLA submission for our product candidate Anktiva, and higher clinical trial costs;

• a $1.3 million increase in personnel-related costs that was primarily the result of additional stock awards to our employees and an increase in personnel involved in our quality control, clinical operations, and drug discovery and development activities;

• a $1.3 million increase in equipment, depreciation, and facility costs that was primarily due to the expansion of our manufacturing facilities in California and New York, which resulted in increases in lease expense, maintenance costs, and depreciation expense;

• a $3.2 million decrease in other research and development costs that was primarily attributable to a decrease in lab and material supplies for internal manufacturing, partially offset by lower nonclinical collaboration expenses in the current period allocated to our joint venture and fewer sponsored research reimbursements.

We expect our research and development expenses to increase significantly for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates and conduct our ongoing and planned clinical trials .

Selling, General and Administrative Expense

Selling, general and administrative expense decreased $30.9 million during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

The reduction in selling, general and administrative expense was primarily driven by a $24.2 million net decline in legal expenses that included year-to-date litigation-related insurance reimbursements received that offset year-to-date legal expenses, a $9.9 million decrease in stock-based compensation expense, and a $9.0 million decrease in consulting costs, primarily due to Merger-related expenses incurred in the prior period.

These decreases were partially offset by an $11.5 million increase in personnel costs due to higher headcount and travel-related costs, and a $0.7 million increase in other costs.

Selling, general and administrative expense decreased $7.9 million during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

The reduction in selling, general and administrative expense was primarily driven by a $9.8 million decline in legal expenses related to litigation settlements and defense costs in the prior period, a $0.2 million reduction in IT equipment and software purchases, and a $0.1 million reduction in insurance costs and other professional service fees.

These decreases were partially offset by a $2.0 million increase in personnel costs due to higher headcount and increased travel costs, and a $0.2 million increase in stock-based compensation expense .

Other Expense, Net

Other expense, net increased $35.3 million during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021.

The increase was due to a $24.6 million increase in interest expense driven by higher related ‑ party borrowings and a mortization of related-party notes discounts , an $8.6 million loss on our equity method investment, and a decrease of $2.1 million in net unrealized gains related to our marketable equity securities.

Other expense, net decreased $2.0 million during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022.

The decrease in other expense, net was mainly due to a $27.6 million gain from a change in the fair value of warrant liabilities .

These decreases were partially offset by a $21.3 million increase in interest expense driven by an increase in related-party borrowings along with an increase in Term SOFR rates and a mortization of related-party notes discounts , a $2.1 million higher loss on our equity method investment, $1.1 million lower net interest and investment income, a $1.0 million increase in issuance costs allocated to the warrant liabilities, and a $0.1 million loss from fixed asset disposals.

Financial Condition, Liquidity and Capital Resources

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The general condition of the financial markets and the economy may increase those risks and may affect the value and liquidity of investments and restrict our ability to access the capital markets.

As of September 30, 2022, we had cash and cash equivalents, and marketable securities of $111.9 million compared to $317.9 million as of December 31, 2021.

On April 30, 2021, we entered into a Sale Agreement with respect to an ATM offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $500.0 million through our sales agent.

We issued no shares under the ATM during the nine months ended September 30, 2022.

As of September 30, 2022, we had $330.8 million available for future stock issuances under the ATM.

Cash and Marketable Securities on Hand

As of March 31, 2023, we had cash and cash equivalents, and marketable securities of $92.1 million compared to $108.0 million as of December 31, 2022.

In April 2021, we entered into an open market sale agreement (Sale Agreement) with respect to an ATM offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, having an aggregate offering price of up to $500.0 million through our sales agent, which was subsequently reduced by $92.0 million during December 2022 in connection with a sale of our common stock.

As of March 31, 2023, we had $225.4 million available for future stock issuances under the ATM.

Shelf Registration Statement

During February 2023, we filed a $750.0 million shelf registration statement with the SEC on Form S-3 for the offering and sale of equity and equity-linked securities, including common stock, preferred stock, debt securities, depositary shares, warrants to purchase common stock, preferred stock or debt securities, subscription rights, purchase contracts, and units.

In February 2023, we sold shares of our common stock and warrants valued at $110.0 million under the shelf.

As of March 31, 2023, we had $640.0 million available for use under the shelf.

This available shelf is in addition to the Open Market Sale Agreement.

See “ —Proceeds from Registered Direct Offering ” below.

Proceeds from Registered Direct Offering

On February 15, 2023, we entered into a securities purchase agreement with certain institutional investors for the sale of 14,072,615 shares of our common stock, as well as warrants that allow such investors to purchase an additional 14,072,615 shares of common stock at an exercise price of $4.26 per share, for an aggregate purchase price of $3.55 per share and accompanying warrant.

This transaction generated net proceeds of approximately $47.0 million, after deducting placement agent fees and other estimated offering costs.

The closing of the offering occurred on February 17, 2023.

We currently intend to use the net proceeds from this offering, together with other available funds, to progress our pre-commercialization efforts and clinical development programs, fund other research and development activities, for capital expenditures, and for other general corporate purposes.

We may also use a portion of the net proceeds to license intellectual property or to make acquisitions or investments.

$30.0 million Variable-Rate Convertible Promissory Note

On March 31, 2023, the company executed a $30.0 million promissory note with Nant Capital, an affiliated entity of the company due to the common control of our Executive Chairman and Global Chief Scientific and Medical Officer.

This note bears interest at Term SOFR plus 8.0% per annum.

The outstanding principal amount and any accrued and unpaid interest are due on the December 31, 2023 or upon the occurrence and continuation of an Event of Default (as defined in the note).

The interest on this note will be paid on a quarterly basis beginning on June 30, 2023.The company may prepay the outstanding promissory note, at any time, in whole or in part, without penalty.

The conversion price is equal to the greater of (i) the NASDAQ Official Closing Price and (ii) the consolidated closing bid price of the company’s common stock on the Conversion Price Date.

We may also use a portion of the net proceeds to license intellectual property or to make acquisitions or investments.

In order to complete the development of our current product candidates, and implement our business plan, we will require substantial additional funding.

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Moreover, our fixed expenses such as rent and other contractual commitments are substantial and are expected to increase in the future.

Additional Borrowing

On May 9, 2023, the company’s Executive Chairman and Global Chief Scientific and Medical Officer agreed to provide immediate non-convertible debt financing in an amount of $30.0 million, which will be available to the company as soon as the underlying agreements are executed.

See — Subsequent Events below .

Uses of Liquidity

In addition to the cash used to fund our operating activities discussed in “ —Future Funding Requirements ” below, we will require cash to settle the following obligations:

• As of September 30, 2022, our indebtedness payable at maturity totals $740.7 million (excluding unamortized related-party notes discounts), held by entities affiliated with Dr.

• As of March 31, 2023, our indebtedness payable at maturity totals $769.9 million (excluding unamortized related-party notes discounts and fair value adjustments), held by entities affiliated with Dr.

Of this amount, $505.0 million is due and payable on December 31, 2023.

In the event of a default on the $300.0 million loan (as defined in the promissory note), including if we do not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into shares of the company’s common stock at price of $5.67 per share.

Additionally, the March 31, 2023 $30.0 million promissory note and accrued interest may be converted in whole at the option of the noteholder following the Conversion Price Date, which is the trading day prior to the opening of the next open trading window, as determined by the company’s board of directors in accordance with the company’s Insider Trading Policy.

The conversion price is equal to the greater of (i) the NASDAQ Official Closing Price and (ii) the consolidated closing bid price of the company’s common stock on the Conversion Price Date.

Furthermore, in the event of a Specified Transaction (as defined in the loan agreement), the noteholder can request the outstanding principal and interest due on the $50.0 million promissory note be repaid in full upon consummation of such Specified Transaction.

The remaining $264.9 million is due and payable on September 30, 2025, including any accrued and unpaid interest.

The company can prepay the outstanding principal (together with accrued and unpaid interest), in whole or in part, at any time without premium or penalty and without the prior consent of the lender.

On August 31, 2022, the terms of these fixed-rate promissory notes were amended and restated to include a conversion feature that gives each lender, at its sole option, at any time (other than when the lender is in receipt of a written notice of prepayment from the borrower), the right to convert the entire outstanding principal amount and accrued and unpaid interest due under each note at the time of conversion into shares of the company’s common stock at a price of $5.67 per share.

Upon receipt of a written notice of prepayment from the borrower, the lender has the right, at its option, to convert the outstanding principal amount to be prepaid and the accrued and unpaid interest thereon (as specified in the notice of prepayment) into shares of the company’s common stock at a price of $5.67 per share.

There can be no assurance that the company can refinance these promissory notes or what terms will be available in the market at the time of refinancing.

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These risks could materially adversely affect the company’s financial condition, cash flows and results of operations.

The remaining $315.7 million is due and payable on September 30, 2025, including any accrued and unpaid interest.

The company can prepay the outstanding principal (together with accrued and unpaid interest), in whole or in part, at any time without premium or penalty and without the prior consent of the lender.

• In connection with our 2017 acquisition of Altor, we issued CVRs under which we agreed to pay the prior stockholders of Altor approximately $304.0 million contingent upon successful approval of a BLA, or foreign equivalent, for N-803 by December 31, 2022 and approximately $304.0 million contingent upon calendar-year worldwide net sales of N-803 exceeding $1.0 billion prior to December 31, 2026 (with amounts payable in cash or shares of our common stock or a combination thereof).

Soon-Shiong and his related party hold approximately $279.5 million in the aggregate of CVRs and they have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

We may be required to pay the other prior Altor stockholders up to $164.2 million in settlement of the CVRs relating to the regulatory milestone and up to $164.2 million of the CVRs relating to the sales milestone should they choose to have the CVRs paid in cash instead of common stock.

We may need to seek additional sources of capital to satisfy the CVR obligations if they are achieved.

We have submitted the BLA, and in July 2022, we announced the FDA has accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

• In connection with our 2017 acquisition of Altor, we issued CVRs under which we agreed to pay the prior stockholders of Altor approximately $304.0 million of contingent consideration upon the successful regulatory approval of a BLA by the FDA, or foreign equivalent, for N-803 by December 31, 2022, and approximately $304.0 million of contingent consideration upon calendar-year worldwide net sales of N-803 exceeding $1.0 billion prior to December 31, 2026, with amounts payable in cash or shares of our common stock or a combination thereof.

With respect to the regulatory milestone CVR agreement, in May 2022 we announced the submission of a BLA to the FDA for our product candidate, Anktiva (N-803) in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease .

I n July 2022 we announced that the FDA had accepted our BLA for review and set a target PDUFA action date of May 23, 2023.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA, as described in greater detail in — Subsequent Events below.

It is unclear when the FDA will approve our BLA, if at all.

If the FDA does not approve our BLA by December 31, 2022, prior to its established target PDUFA action date, the $304.0 million related to the regulatory milestone will not be payable and the holders of these CVRs will not receive any cash or shares of our common stock on account of the regulatory milestone CVRs.

The FDA did not approve our BLA on or before December 31, 2022, and therefore the regulatory milestone was not met, and the regulatory milestone CVR agreement terminated in accordance with its terms.

With respect to the net sales milestone CVR agreement, as of March 31, 2023, Dr.

Soon-Shiong and his related party hold approximately $139.8 million of net sales CVRs and they have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

We may be required to pay the other prior Altor stockholders up to $164.2 million for their net sales CVRs should they choose to have their CVRs paid in cash instead of common stock.

We may need to seek additional sources of capital to satisfy the CVR obligations if they are achieved.

• In connection with our acquisition of VivaBioCell, we are obligated to pay the former owners approximately $2.2 million of contingent consideration upon the achievement of a regulatory milestone relating to the GMP-in-a-Box technology.

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The following table sets forth our primary sources and uses of cash for periods indicated (in thousands):

Nine Months Ended

September 30,

Three Months Ended

Cash (used in) provided by:

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Operating Activities

For the nine months ended September 30, 2022, net cash used in operating activities of $246.8 million consisted of a net loss of $309.0 million and $1.4 million of cash used in net working capital, partially offset by $63.6 million in adjustments for non-cash items.

The changes in net working capital consisted primarily of an increase of $14.4 million in prepaid and other current assets, and decreases of $2.3 million in operating lease liabilities and $1.6 million with related parties, partially offset by an increase of $7.6 million in accounts payable, $7.2 million in accrued expenses and other liabilities, and decreases of $2.1 million in other assets.

Adjustments for non-cash items primarily consisted of $30.8 million in stock-based compensation expense, $13.8 million in non-cash interest and debt discount amortization primarily related to related-party promissory notes, $13.0 million in depreciation and amortization expense, $4.3 million in non-cash lease expense related to operating lease right‑of‑use assets, $1.3 million in other non-cash items, and a non-cash $0.7 million loss on the impairment of intangible assets, reduced by $0.2 million in unrealized gains on equity securities driven by an increase in the value of our investments and $0.1 million of other.

For the nine months ended September 30, 2021, net cash used in operating activities of $202.8 million consisted of a net loss of $258.3 million and $12.3 million of cash used in net working capital, partially offset by $67.8 million in adjustments for non-cash items.

The change in net working capital consisted primarily of increases of $4.8 million in other assets, $4.7 million with related parties, decreases of $3.6 million in operating lease liabilities, and a decrease of $0.2 million in accounts payable, partially offset by increases of $0.6 million in accrued expenses and other liabilities, and decreases of $0.4 million in other current assets.

Adjustments for non-cash items primarily consisted of $47.0 million in stock-based compensation expense, $10.6 million in depreciation and amortization, $9.1 million in non-cash interest primarily related to related-party loans, $3.5 million in non ‑ cash lease expense related to operating lease right-of-use assets, and $0.3 million of non-cash amortization of net premiums and discounts on marketable debt securities reduced by $2.4 million in unrealized gains on marketable equity securities driven by an increase in the value of our investments and $0.3 million in other non-cash items.

For the three months ended March 31, 2023, net cash used in operating activities of $84.3 million consisted of a net loss of $116.6 million, partially offset by $27.7 million of cash provided by net working capital and $4.6 million in adjustments for non-cash items.

The changes in net working capital consisted primarily of an increase of $18.6 million in accrued expenses and other liabilities, a decrease of $9.7 million in prepaid and other current assets, an increase of $0.7 million in accounts payable, and a decrease of $0.3 million in other assets, partially offset by decreases of $1.5 million in operating lease liabilities, and $0.1 million with related parties.

Adjustments for non-cash items primarily consisted of $11.5 million in amortization of debt issuance costs and accretion of discounts, $10.9 million in stock-based compensation expense, $4.7 million in depreciation and amortization expense, $2.5 million in non-cash interest and debt discount amortization primarily related to related-party promissory notes, $1.6 million in non-cash lease expense related to operating lease right‑of‑use assets, $1.0 million in transaction costs allocable to warrant liabilities, and $0.1 million of other, reduced by a $27.6 million change in the fair value of warrant liabilities, and $0.1 million in unrealized gains on equity securities driven by an increase in the value of our investments.

For the three months ended March 31, 2022, net cash used in operating activities of $74.9 million consisted of a net loss of $103.0 million, partially offset by $18.5 million in adjustments for non-cash items and $9.6 million of cash provided by net working capital changes.

Adjustments for non-cash items primarily consisted of $10.0 million in stock-based compensation expense, $4.1 million in depreciation and amortization expense, $3.0 million in non-cash interest related primarily to related-party promissory notes, $1.3 million in non-cash lease expense related to operating lease right-of-use assets, $1.1 million in other non-cash items, and a $0.4 million in amortization of debt issuance costs and accretion of discounts, reduced by $1.4 million in unrealized gains on equity securities driven by an increase in the value of our investments.

The changes in net working capital consisted primarily of increases of $10.9 million in accrued expenses and other liabilities and $0.8 million in accounts payable and a decrease of $0.1 million in other assets, partially offset by decreases of $1.6 million with related parties and $0.4 million in operating lease liabilities, and an increase of $0.2 million in prepaid and other current assets.

We have historically experienced negative cash flows from operating activities, with such negative cash flows likely to continue for the foreseeable future.

Investing Activities

For the nine months ended September 30, 2022, net cash provided by investing activities was $46.2 million, which included cash inflows of $162.0 million from maturities and sales of marketable debt and equity securities, partially offset by $59.3 million of purchases of property, plant and equipment (including construction in process and depreciable property acquired in the Dunkirk acquisition), $34.3 million of purchases of marketable debt securities, $21.2 million for purchase of intangible assets (related to the Dunkirk acquisition), and a $1.0 million investment in a joint venture.

For the three months ended March 31, 2023, net cash used in investing activities was $8.5 million, which included cash outflows of $8.4 million of purchases of property, plant and equipment, and $0.2 million of purchases of marketable debt securities, partially offset by proceeds of $0.1 million from maturities and sales of marketable debt and equity securities.

Our investments in property, plant and equipment are primarily related to acquisitions of equipment that will be used for the manufacturing of our product candidates and expenditures related to the build out of our manufacturing facilities.

For the nine months ended September 30, 2021, net cash provided by investing activities was $52.9 million, which included cash inflows of $58.3 million from maturities and sales of marketable debt securities and $20.5 million in net proceeds from sales of property, plant and equipment, mainly due to the sale of 557 Doug St, LLC, partially offset by $23.2 million of purchases of property, plant and equipment and $2.7 million in purchases of marketable debt securities.

Our investments in property, plant and equipment were related primarily to acquisitions of equipment that will be used for the manufacturing of our product candidates and expenditures related to the build out of our manufacturing facilities.

For the three months ended March 31, 2022, net cash used in in investing activities was $69.3 million, which included $34.1 million of purchases of marketable debt securities, $27.3 million of purchases of property, plant and equipment (including construction in process and depreciable property acquired in the Dunkirk acquisition), $21.2 million for the purchase of intangible assets (related to the Dunkirk acquisition), and a $1.0 million investment in the joint venture, partially offset by cash inflows of $14.3 million from maturities and sales of marketable debt and equity securities.

We expect to accelerate our capital spending as we scale our GMP manufacturing capabilities, which will require significant capital for the foreseeable future.

Financing Activities

For the nine months ended September 30, 2022, net cash provided by financing activities was $123.7 million, which consisted of $124.4 million in net proceeds from issuances of related-party promissory notes, partially offset by $0.4 million related to net share settlement of vested RSUs for payment of payroll tax withholding and $0.3 million payment for contingent consideration.

For the nine months ended September 30, 2021, net cash provided by financing activities was $179.5 million, which consisted of $137.0 million in net proceeds from the ATM offering, $40.0 million in net proceeds from issuances of related-party promissory notes, $5.1 million in proceeds from exercises of stock options and a $1.4 million capital contribution related to the sale of 557 Doug St, LLC to an entity under common control, partially offset by $3.6 million related to net share settlement of vested RSUs for payment of payroll tax withholding and a $0.4 million payment for contingent consideration.

For the three months ended March 31, 2023, net cash provided by financing activities was $76.9 million, which consisted of $47.3 million in net proceeds from a registered direct offering, $29.9 million in net proceeds from issuances of related-party promissory notes, and $0.1 million of proceeds from the exercise of stock options, partially offset by $0.4 million related to net share settlement of vested RSUs for payment of payroll tax withholding.

For the three months ended March 31, 2022, net cash used in financing activities was $0.3 million, which consisted of $0.4 million related to net share settlement of vested RSUs for payment of payroll tax withholding, partially offset by $0.1 million in proceeds from exercises of stock options.

Future Funding Requirements

From inception through the date of this Quarterly Report on Form 10-Q, we have generated minimal revenue, and we have no clinical products approved for commercial sale and have not generated any revenue from therapeutic and vaccine product candidates that are under development.

From inception through the date of this Quarterly Report on Form 10-Q, we have generated minimal revenue, we have no clinical products approved for commercial sale and we have not generated any revenue from therapeutic and vaccine product candidates that are under development.

We do not expect to generate significant revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, this will occur.

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Unless and until we can generate a sufficient amount of revenues, we may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements.

However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all, including but not limited to the offering, issuance and sale by us of up to a maximum aggregate amount of $500.0 million of our common stock that may be issued and sold under the ATM.

As of September 30, 2022, we had $330.8 million available for future stock issuances under the ATM.

However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all, including but not limited to the offering, issuance and sale by us of our common stock that may be issued and sold under the ATM.

As of March 31, 2023, we had $225.4 million available for future stock issuances under the ATM.

See Note 12 , Stockholders’ Deficit , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q.

As of March 31, 2023, we had $640.0 million available for use under the shelf.

See Note 12 , Stockholders’ Deficit , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

“Financial Statements” of this Quarterly Report on Form 10-Q.

To the extent that we raise additional capital through the sale of equity or equity-linked securities, including convertible debt or through the ATM or other offerings, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

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• We are obligated to make payments to several related-party affiliates under written agreements and other informal arrangements.

We are also obligated to pay interest and to repay principal under our related-party promissory notes.

We are also obligated to pay interest and to repay principal under our related-party notes.

For information regarding our financing obligations, see Note 9 , Related-Party Debt, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

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• We have certain contractual commitments that are expected to be paid within one year, depending on the progress of build outs, completion of services, and the realization of milestones associated with third-party agreements.

This amount totals $126.5 million and is primarily related to capital expenditures, open purchase orders as of September 30, 2022 for the acquisition of goods and services in the ordinary course of business, and near term upfront milestone payments to third parties.

This amount totals $132.4 million and is primarily related to capital expenditures, open purchase orders as of March 31, 2023 for the acquisition of goods and services in the ordinary course of business, and near term upfront milestone payments to third parties.

• In addition, we have contractual commitments that are expected to be paid in fiscal year 2024 and beyond based on the achievement of various development, regulatory and commercial milestones for agreements with third parties.

These payments may not be realized or may be modified and are contingent upon the occurrence of various future events, substantially all of which have a high degree of uncertainty of occurring.

As of September 30, 2022, the maximum amount that may be payable related to these commitments is $594.7 million.

As of March 31, 2023, the maximum amount that may be payable related to these commitments is $775.3 million.

• In connection with our leasehold interest in the Dunkirk Facility, we committed to spend an aggregate of $1.52 billion on operational expenses during the initial 10-year term, and an additional $1.50 billion on operational expenses if we elect to renew the lease for the additional 10-year term.

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The preparation of our condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses for the reporting period.

On an ongoing basis, we evaluate our estimates, including those related to the valuation of equity-based awards, deferred income taxes and related valuation allowances, preclinical and clinical trial accruals, impairment assessments, contingent value right measurement and assessments, the measurement of right-of-use assets and lease liabilities, useful lives of long-lived assets, loss contingencies, fair value measurements, and the assessment of our ability to fund our operations for at least the next 12 months from the date of issuance of these financial statements.

On an ongoing basis, we evaluate our estimates, including those related to the valuation of equity-based awards, deferred income taxes and related valuation allowances, preclinical and clinical trial accruals, impairment assessments, contingent value right measurement and assessments, the measurement of right-of-use assets and lease liabilities, useful lives of long-lived assets, loss contingencies, fair value calculation of warrants and convertible promissory notes, fair value measurements, asset acquisition, and the assessment of our ability to fund our operations for at least the next 12 months from the date of issuance of these condensed consolidated financial statements.

We base our estimates on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances.

Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the ongoing coronavirus pandemic could have on our significant accounting estimates.

Actual results could differ from those estimates.

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“Financial Statements” of this Quarterly Report on Form 10-Q for a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us.

Subsequent Events

ImmunityBio, Inc.

announced that it had received a complete response letter from the FDA on May 9, 2023 regarding its BLA for its product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease.

The letter indicated that the FDA had determined that it cannot approve the BLA in its present form, and the FDA had made recommendations to address the issues raised.

The deficiencies relate to the FDA’s pre-license inspection of the company’s third-party contract manufacturing organizations.

Satisfactory resolution of the observations noted at the pre-license inspection is required before the BLA may be approved.

The FDA further provided recommendations specific to additional Chemistry, Manufacturing and Controls (CMC) issues and assays to be resolved.

No new preclinical studies or Phase 3 clinical trials to evaluate safety or efficacy were requested by the FDA.

The FDA requested that the company provide updated duration of response data of the efficacy population as identified by the FDA in the company’s resubmission, as well as a safety update.

The company plans to request a meeting with the FDA as soon as possible to address the subject matter of the letter and a response timeline, and plans to diligently address and resolve the issues identified and seek approval as expeditiously as possible.

Business Development Updates

On May 9, 2023, the company’s Executive Chairman and Global Chief Scientific and Medical Officer agreed to provide immediate non-convertible debt financing to the company in an amount of $30.0 million on substantially similar terms as prior financings, including an interest rate of Term SOFR plus 8% per annum and a maturity date of December 31, 2023.

As previously disclosed, the company has been exploring partnering with a large biopharmaceutical company for commercialization of N-803 for intravesical administration.

The company has confirmed with the potential partner that these negotiations will continue notwithstanding the letter referenced above, with the view of completing such a transaction during 2023, though there can be no assurance that the company will complete a transaction on acceptable terms in accordance with this timeline or at all.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis