What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-11 · 187 added, 125 removed, 343 unchanged (48% of the section changed)

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

• our ability, and the ability of our third-party CMOs, to adequately address the issues raised in the FDA’s CRL;

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

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• 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;

• our expectations regarding the development, application, commercialization, marketing, prospects and use generally of our product candidates, including Anktiva, 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 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 and support our SARS-CoV-2 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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• 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 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;

• 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;

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

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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).

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

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

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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—natural killer (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—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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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.

We are currently engaged in multiple active clinical trials involving our agents, some of which are being sponsored by ImmunityBio and others are investigator-led studies.

Many of these trials are in Phase 2 or 3 development across several 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).

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

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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 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.

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.

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.

On May 9, 2023, the FDA delivered a CRL to us regarding the BLA, indicating that the FDA had determined that it cannot approve the BLA in its present form, and the FDA made recommendations to address the issues raised.

The deficiencies relate to the FDA’s pre-license inspection of the company’s third-party CMOs, among other items.

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 CMC issues and assays to be resolved.

The CRL does not request new preclinical studies or Phase 3 clinical trials to evaluate safety or efficacy.

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

The company has submitted a formal meeting request and the associated briefing book to the FDA and plans to diligently address and resolve the issues identified in the CRL and seek approval as expeditiously as possible.

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.

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 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.

We have incurred net losses in each year since our inception and, as of June 30, 2023, we had an accumulated deficit of $2.6 billion.

Our net losses attributable to ImmunityBio common stockholders were $254.2 million and $197.4 million during the six months ended June 30, 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 March 31, 2023, we had 703 employees.

As of June 30, 2023, we had 683 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 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 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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Related-Party Debt

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.

The following description of the company’s related-party variable-rate 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.

$30.0 million Variable-Rate Promissory Note

On June 13, 2023, the company executed a $30.0 million promissory note (the Note) with Nant Capital, an entity affiliated with Dr.

Patrick Soon-Shiong, Executive Chairman and Global Chief Scientific and Medical Officer.

The company was able to request up to three (3) advances of $10.0 million each pursuant to the Note.

The principal amount of each advance bears interest at Term SOFR plus 8.0% per annum.

The accrued interest on any advance is payable quarterly on the last business day of June, September and December.

The outstanding principal amount and any accrued and unpaid interest on advances are due on the earlier of (i) December 31, 2023 or (ii) upon the occurrence and during the continuance of an Event of Default (as defined in the Note).

We may prepay the outstanding principal amount, together with any accrued interest, on any then-outstanding advances, at any time, in whole or in part, without premium or penalty, and without the prior consent of the Investor, upon five (5) days written notice to the Investor.

We received net proceeds of approximately $29.9 million from this Note, net of a $0.1 million origination fee paid to Nant Capital, which we intend to use, together with other available funds, to progress our regulatory approval efforts, pre-commercialization activities 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.

Related-Party Convertible Note at Fair Value

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

The interest on this note is 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.

Upon receipt of a written notice of prepayment from the company, the note holder 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 $2.28 per share.

Additionally, the whole promissory note and accrued interest may be converted into shares of the company’s common stock at a conversion price of $2.28 per share (subject to appropriate adjustment from time to time for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event), at the option of the note holder.

The company received net proceeds of $29.9 million from this financing, net of a $0.1 million origination fee paid to the note holder, which we used, 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.

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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.

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

As of June 30, 2023, we had a balance of $36.6 million in related-party convertible note at fair value , on the condensed consolidated balance sheet related to this note.

See Note 9 , Related-Party Debt, 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 a more detailed discussion of our related-party debt.

Immuno-Oncology Clinic, Inc.

We entered into multiple agreements with the Clinic to conduct clinical trials related to certain of our product candidates.

We have entered into multiple agreements with the Clinic to conduct clinical trials related to certain of our product candidates.

The Clinic is a related party as it is owned by an officer of the company and NantWorks manages the administrative operations of the Clinic.

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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.

During the six months ended June 30, 2023 and 2022 , we incurred $1.4 million and $1.3 million, respectively, in research and development expense , on the condensed consolidated statements of operations related to clinical trial and transition services provided by the Clinic.

605 Doug St, LLC

In June 2023, we exercised the option to extend the lease agreement with 605 Doug St, LLC, an entity owned by our Executive Chairman and Global Chief Scientific and Medical Officer, for one additional three-year term through July 2026.

See 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.

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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.

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.

There can be no assurance that our product candidate will be approved for commercial sale by the FDA in the near term, 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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federal income tax, as well as income tax in Italy, South Korea, California and other states.

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

From inception through June 30, 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 March 31, 2023 and 2022

Comparison of the Three Months Ended June 30, 2023 and 2022

Three Months Ended

March 31, $ Change % Change

June 30, $ Change % Change

(Unaudited, $ in thousands)

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Loss from operations (85,145) (79,622) (5,523) 7 %

Other income (expense), net:

Other (expense) income, net:

Interest and investment income, net (61) (1,800) 1,739 (97) %

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Change in fair value of warrant liabilities (10,019) — (10,019) — %

Change in fair value of convertible notes (6,768) — (6,768) — %

Other loss, net (including amounts

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Net loss $ (138,213) $ (94,835) $ (43,378) 46 %

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.

Revenue for the three months ended June 30, 2023 and 2022 was less than $0.1 million and was related to the sale of bioreactors and accessories.

Research and Development Expense

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):

Research and development expense decreased $9.9 million during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

The following table summarizes our research and development expenses during the three months ended June 30, 2023 and 2022, together with the changes in those items (in thousands):

Three Months Ended

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Total research and development expenses $ 53,168 $ 63,082 $ (9,914)

Research and development expense decreased $9.9 million primarily attributable to the following:

• a $5.1 million decrease in external research and development expenses that was primarily due to lowered regulatory and compliance costs resulting from the prior period BLA submission for our product candidate Anktiva, lower CMO fees and drug materials purchased and used, and decreased clinical trial activities;

• a $5.1 million decrease in other research and development costs that was primarily due to reductions in laboratory and test supplies and material supplies used for internal manufacturing, and higher nonclinical collaboration expenses in the current period allocated to our joint venture that were partially offset by fewer sponsored research reimbursements;

• a $0.1 million decrease in equipment, depreciation, and facility costs that was primarily due to reductions in services at non-manufacturing facilities, and reduced IT and software purchases;

• a $0.4 million increase in personnel-related costs that was primarily due to higher headcount for personnel involved in our quality control, clinical operations, and drug discovery and development activities.

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 increased $15.4 million during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

The increase in selling, general and administrative expense was primarily driven by a $14.0 million increase in legal expenses related to fewer insurance reimbursements on litigation matters, higher defense costs, and increased general legal services that were partially offset by the absence of charges associated with settlements compared to prior periods, a $0.9 million increase in personnel costs due to higher headcount and increased travel costs, a $0.6 million increase in license fees, a $0.2 million increase in stock-based compensation expense, and a $0.2 million increase in other costs.

These increases were partially offset by a $0.5 million reduction in insurance costs.

Other Expense, Net

Other expense, net increased $37.9 million during the three months ended June 30, 2023, as compared to the three months ended June 30, 2022.

The increase in other expense, net was mainly due to a $22.5 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 $10.0 million higher loss from a change in the fair value of warrant liabilities, a $6.8 million higher loss from a change in the fair value of convertible notes, a $0.2 million increase in other expenses, and a $0.1 million higher loss on our equity method investment.

These increases were partially offset by $1.7 million higher net interest and investment income.

Comparison of the Six Months Ended June 30, 2023 and 2022

Six Months Ended

June 30, $ Change % Change

(Unaudited, $ in thousands)

Revenue $ 401 $ 49 $ 352 718 %

Operating expenses:

Research and development (including amounts

with related parties) 132,432 118,460 13,972 12 %

Selling, general and administrative (including amounts

with related parties) 64,694 57,183 7,511 13 %

Total operating expenses 197,126 175,643 21,483 12 %

Loss from operations (196,725) (175,594) (21,131) 12 %

Other expense, net:

Interest and investment income, net 612 (134) 746 (557) %

Interest expense (including amounts with related parties) (62,051) (18,189) (43,862) 241 %

Loss on equity method investment (6,294) (4,097) (2,197) 54 %

Change in fair value of warrant liability 17,535 — 17,535 — %

Change in fair value of convertible note (6,768) — (6,768) — %

Other (expense) income, net (including amounts

with related parties) (1,105) 181 (1,286) (710) %

Total other expense, net (58,071) (22,239) (35,832) 161 %

Loss before income taxes and noncontrolling interests (254,796) (197,833) (56,963) 29 %

Income tax expense — — — — %

Net loss $ (254,796) $ (197,833) $ (56,963) 29 %

Revenue increased $0.4 million during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

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

Research and Development Expense

Research and development expense increased $14.0 million during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

The following table summarizes our research and development expenses during the six months ended June 30, 2023 and 2022, together with the changes in those items (in thousands):

Six Months Ended

2023 2022 $ Change

(Unaudited, $ in thousands)

External research and development expenses $ 45,833 $ 26,496 $ 19,337

Internal research and development expenses:

Personnel-related costs 47,570 45,862 1,708

Equipment, depreciation, and facility costs 26,338 25,173 1,165

Other research and development costs 12,691 20,929 (8,238)

Total internal research and development expenses 86,599 91,964 (5,365)

Total research and development expenses $ 132,432 $ 118,460 $ 13,972

Research and development expense increased $14.0 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.

• a $19.3 million increase in external research and development expenses that was primarily due to a rise in 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 $1.7 million increase in personnel-related costs that was primarily due to higher headcount costs for personnel involved in our quality control, clinical operations, and drug discovery and development activities;

• a $1.2 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, partially offset by reduced IT and software purchases;

• an $8.2 million decrease in other research and development costs that was primarily attributable to a decrease in laboratory and test supplies and material supplies used for internal manufacturing, and higher nonclinical collaboration expenses in the current period allocated to our joint venture partially offset by fewer sponsored research reimbursements.

Selling, General and Administrative Expense

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 .

Selling, general and administrative expense increased $7.5 million during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

The increase in selling, general and administrative expense was primarily driven by a $4.2 million increase in legal expenses, driven by higher defense costs and increased general legal services that were partially offset by the absence of charges associated with settlements compared to prior periods, a $2.9 million increase in personnel costs due to higher headcount and travel-related costs, a $0.9 million increase in license fees, a $0.6 million increase in marketing costs for pre-commercialization activities, and a $0.4 million increase in stock-based compensation expense.

These increases were partially offset by a $1.0 million reduction in insurance costs, and a $0.5 million reduction in IT and software purchases.

Other Expense, Net

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.

Other expense, net increased $35.8 million during the six months ended June 30, 2023, as compared to the six months ended June 30, 2022.

The increase was due to a $43.9 million increase in interest expense driven by higher related ‑ party borrowings and a mortization of related-party notes discounts , a $6.8 million higher loss from a change in the fair value of convertible notes, a $2.2 million higher loss on our equity method investment, a $1.0 million increase in issuance costs allocated to the warrant liabilities, and a $0.3 million increase in other expenses.

These increases were partially offset by a $17.5 million higher gain from a change in the fair value of warrant liabilities, and $0.7 million higher net interest and investment income.

Financial Condition, Liquidity and Capital Resources

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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.

As of June 30, 2023, we had cash and cash equivalents, and marketable securities of $46.8 million compared to $108.0 million as of December 31, 2022.

Proceeds from the ATM

During the six months ended June 30, 2023, we received net proceeds totaling $13.6 million from the issuance of 4,605,323 shares under the ATM.

We used or currently intend to use the net proceeds from this offering, together with other available funds, to progress our regulatory approval efforts, pre-commercialization activities 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.

As of June 30, 2023, we had $211.4 million available for future stock issuances under the ATM.

Shelf Registration Statement

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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.

As of June 30, 2023, we had $640.0 million available for use under the shelf.

This available shelf is in addition to the ATM.

In July 2023, we entered into a warrant repricing and extension of the February 2023 Warrants pursuant to the terms of the securities purchase agreement dated July 25, 2023 that changed the amount available under the shelf.

After the February 2023 Warrant amendment and the July 25, 2023 offering, we have $565.6 million available for use under the shelf registration statement.

See “ — Subsequent Events ” for further information.

Proceeds from Registered Direct Offerings

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 $4.2636 per share, for a purchase price of $3.5530 per share and accompanying warrant.

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

On July 20, 2023, we entered into a securities purchase agreement with certain institutional investors for the purchase and sale of 14,569,296 shares of our common stock, as well as warrants that allow such investors to purchase an additional 14,569,296 shares of common stock at an exercise price of $3.2946 per share, for a purchase price of $2.7455 per share and accompanying warrant.

This transaction generated gross proceeds of approximately $40.0 million, before deducting placement agent fees and other estimated offering costs.

See “ — Subsequent Events ” for further information.

We used or currently intend to use the net proceeds from these registered direct offerings, together with other available funds, to progress our regulatory approval efforts, pre-commercialization activities 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.

Related-Party Promissory Notes

On March 31, 2023, we 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.

The company received net proceeds of $29.9 million from this financing, net of a $0.1 million origination fee paid to the note holder, which we used, together with other available funds, to progress our pre-commercialization activities 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.

On June 13, 2023, we executed a $30.0 million promissory note with Nant Capital.

The company received net proceeds of $29.9 million from this financing, net of a $0.1 million origination fee paid to the note holder, which we intend to use, together with other available funds, to progress our regulatory approval efforts, pre-commercialization activities 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.

Partnership with Biopharmaceutical Company

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 CRL received from the FDA, 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.

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 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.

• As of June 30, 2023, our indebtedness payable at maturity totals $802.5 million (excluding unamortized related-party notes discounts and fair value adjustments), held by entities affiliated with Dr.

Of this amount, $535.0 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.

Additionally, the March 31, 2023 $30.0 million promissory note and accrued interest may be converted into shares of the company’s common stock at a conversion price of $2.28 per share (subject to appropriate adjustment from time to time for any stock dividend, stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event), at the option of the note holder.

Furthermore, in the event of a Specified Transaction (as defined in the loan agreement), the note holder 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 $267.5 million is due and payable on September 30, 2025, including any accrued and unpaid interest.

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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.

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.

With respect to the net sales milestone CVR agreement, as of June 30, 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.

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

Three Months Ended

Six Months Ended

Cash (used in) provided by:

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Operating Activities

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.

During the six months ended June 30, 2023, net cash used in operating activities of $164.1 million consisted of a net loss of $254.8 million, partially offset by $54.0 million in adjustments for non-cash items and $36.7 million of cash provided by net working capital.

Adjustments for non-cash items primarily consisted of $23.8 million in amortization of debt issuance costs and accretion of discounts, $21.9 million in stock-based compensation expense, $9.4 million in depreciation and amortization expense, a $6.8 million change in the fair value of a related-party convertible note, $5.0 million in non-cash interest and debt discount amortization primarily related to related-party promissory notes, $3.2 million in non-cash lease expense related to operating lease right‑of‑use assets, $1.0 million in transaction costs allocable to warrant liabilities, $0.3 million in unrealized losses on equity securities driven by a decrease in the value of our investments, and $0.1 million of other, reduced by a $17.5 million change in the fair value of warrant liabilities.

The changes in net working capital consisted primarily of an increase of $27.9 million in accrued expenses and other liabilities, a decrease of $11.2 million in prepaid and other current assets, and a decrease of $1.0 million in other assets, partially offset by decreases of $1.3 million in operating lease liabilities, $1.2 million with related parties, and $0.9 million in accounts payable.

During the six months ended June 30, 2022, net cash used in operating activities of $166.2 million consisted of a net loss of $197.8 million, partially offset by $40.4 million in adjustments for non-cash items and $8.8 million of cash used in net working capital.

Adjustments for non-cash items primarily consisted of $20.2 million in stock-based compensation expense, $8.5 million in depreciation and amortization expense, $6.2 million in non-cash interest related primarily to related-party promissory notes, $2.8 million in non-cash lease expense related to operating lease right-of-use assets, $1.3 million in amortization of premiums, net of discounts, on marketable debt securities, $0.7 million in amortization of debt issuance costs, $0.5 million in unrealized losses on equity securities driven by a decrease in the value of our investments, and $0.2 million in other non-cash items.

The changes in net working capital consisted primarily of an increase of $14.5 million in prepaid and other current assets and a decrease of $2.2 million in operating lease liabilities, partially offset by increases of $6.5 million in accounts payable and $0.6 million in accrued expenses and other liabilities, a decrease of $0.7 million in other assets, and $0.1 million in other working capital.

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 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.

During the six months ended June 30, 2023, net cash used in investing activities was $17.1 million, which included cash outflows of $17.0 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 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.

During the six months ended June 30, 2022, net cash provided by investing activities was $47.4 million, which included cash inflows of $147.1 million from maturities and sales of marketable debt and equity securities, partially offset by $43.3 million of purchases of property, plant and equipment (including construction in progress and depreciable property acquired in the Dunkirk acquisition), $34.2 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 the joint venture.

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Financing Activities

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.

During the six months ended June 30, 2023, net cash provided by financing activities was $120.3 million, which consisted of $59.7 million in net proceeds from issuances of related-party promissory notes, $47.2 million in net proceeds from a registered direct offering, $13.6 million in net proceeds from the ATM offering, and $0.2 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.

During the six months ended June 30, 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

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As a result of continuing anticipated operating cash outflows, we believe that substantial doubt exists regarding our ability to continue as a going concern without additional funding or financial support.

However, we believe our existing cash, cash equivalents, and investments in marketable securities, together with capital to be raised through equity offerings (including the ATM) and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the condensed consolidated financial statements based primarily upon our Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

However, we believe our existing cash, cash equivalents, and investments in marketable securities, together with capital to be raised through equity offerings (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, of which we had $211.4 million available for future issuance as of June 30, 2023, and a February 2023 shelf registration statement, of which we had $640.0 million available for future offerings as of June 30, 2023, which was subsequently reduced to $565.6 million as of July 25, 2023.

See “ — Subsequent Events ” for further information.), and our potential ability to borrow from affiliated entities, will be sufficient to fund our operations through at least the next 12 months following the issuance date of the condensed consolidated financial statements based primarily upon our Executive Chairman and Global Chief Scientific and Medical Officer’s intent and ability to support our operations with additional funds, including loans from affiliated entities, as required, which we believe alleviates such doubt.

We may also seek to sell additional equity, through one or more follow-on public offerings, or in separate financings, or obtain a credit facility.

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Further, because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we may need additional funds to meet our needs sooner than planned.

We may also seek to sell additional equity, through one or more follow-on offerings, or in separate financings, or obtain a credit facility.

However, we may not be able to secure such external financing in a timely manner or on favorable terms.

Without additional funds, we may choose to delay or reduce our operating or investment expenditures.

Further, because of the risk and uncertainties associated with the potential commercialization of our product candidates in development, we may need additional funds to meet our needs sooner than planned.

We will need to obtain additional financing to fund our future operations, including completing the development and commercialization of our product candidates.

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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.

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.

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.

The company has been exploring partnering with a large biopharmaceutical company for commercialization of N-803 for intravesical administration.

To the extent that we raise additional capital through the sale of equity or equity-linked securities (including warrants), convertible debt or through the ATM, our shelf registration statement, or other offerings, or if any of our current debt is converted into equity or if our existing warrants are exercised, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

The incurrence of additional indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

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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 $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.

This amount totals $115.1 million and is primarily related to capital expenditures, open purchase orders as of June 30, 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 March 31, 2023, the maximum amount that may be payable related to these commitments is $775.3 million.

As of June 30, 2023, the maximum amount that may be payable related to these commitments is $775.4 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.

These amounts are not included in the discussion above.

See Note 6 , Collaboration and License Agreements and Acquisition , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

See Note 6 , Collaboration and License Agreements and Acquisition—Acquisition , of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1.

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

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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.

Registered Direct Offering

On July 20, 2023, we entered into a securities purchase agreement with certain institutional investors for the purchase and sale of 14,569,296 shares of the company’s common stock, as well as warrants that allow such investors to purchase an additional 14,569,296 shares of common stock at an exercise price of $3.2946 per share, for a purchase price of $2.7455 per share and accompanying warrant, generating gross proceeds from the offering of approximately $40.0 million, before deducting placement agent fees and other estimated offering costs.

The warrants became immediately exercisable on July 25, 2023 and expire three years after the issuance date on July 24, 2026.

February 2023 Warrant Amendment

The company reduced the exercise price of the outstanding warrants issued on February 17, 2023 pursuant to the terms of the securities purchase agreement dated July 25, 2023 from $4.2636 per share to $3.2946 per share.

In addition, the expiration date of the warrants was extended to July 24, 2026.

As of July 25, 2023, 14,072,615 warrants were outstanding.

As a result of the Reduced Exercise Price, the net proceeds that the company may receive from the exercise of the February 2023 Warrants (assuming all warrants are exercised in cash) decreased from approximately $60.0 million to approximately $46.4 million.

Other than the reduction in the per share exercise price and extension of the expiration date of the warrants, all other terms and provisions of the February 2023 Warrants remain unchanged.

After the February 2023 Warrant amendment and the July 25, 2023 offering, we have $565.6 million available for use under the shelf registration statement.

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