What changed in this filing

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Item 1A. Risk Factors

2023-08-08 compared with 2023-05-11 · 123 added, 93 removed, 1498 unchanged (13% of the section changed)

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• We will be substantially dependent on the success of our product candidates and cannot guarantee that these product candidates will successfully complete development, receive regulatory approval or be successfully commercialized.

• The CRL we received from the FDA for the BLA has delayed, and may decrease the likelihood of, ultimate approval and successful commercialization 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 in the U.S.

and potentially other markets.

• There can be no assurance that we will complete a strategic partnership transaction on acceptable terms in accordance with our anticipated timeline, or at all.

• We are developing product candidates in combination with other therapies, which exposes us to additional risks.

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Our operations have consumed substantial amounts of cash since inception.

A significant portion of our funding had been in the form of promissory notes totaling $769.9 million in indebtedness (consisting of related-party promissory notes and accrued and unpaid interest) as of March 31, 2023 held by entities affiliated with Dr.

As of March 31, 2023, we held cash, cash equivalents and marketable securities totaling $92.1 million.

A significant portion of our funding had been in the form of promissory notes totaling $802.5 million in indebtedness (consisting of related-party promissory notes and accrued and unpaid interest) as of June 30, 2023 held by entities affiliated with Dr.

As of June 30, 2023, we held cash, cash equivalents and marketable securities totaling $46.8 million.

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.

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, the shelf registration statement or other offerings, or if any of our current debt is converted into equity, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

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 a significant amount of debt and may need to incur additional debt to support our growth.

As of March 31, 2023, our indebtedness totals $769.9 million, (consisting of related-party promissory notes and accrued and unpaid interest), held by entities affiliated with Dr.

As of June 30, 2023, our indebtedness totals $802.5 million, (consisting of related-party promissory notes and accrued and unpaid interest), held by entities affiliated with Dr.

Our substantial amount of debt could have important consequences and could:

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Conversion of certain related-party notes may dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.

As of March 31, 2023, the company currently has promissory notes totaling an aggregate of $769.9 million, (consisting of related-party promissory notes and accrued and unpaid interest) held by entities affiliated with Dr.

As of June 30, 2023, the company currently has promissory notes totaling an aggregate of $802.5 million, (consisting of related-party promissory notes and accrued and unpaid interest) held by entities affiliated with Dr.

Soon-Shiong (some of which are convertible under certain circumstances), including variable-rate promissory notes in an aggregate amount of $535.0 million that become due and payable on December 31, 2023, and fixed-rate promissory notes in an aggregate amount of $267.5 million (consisting of principal and accrued and unpaid interest) that become due and payable on September 30, 2025.

In the event of a default on the $300.0 million 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 of accrued and unpaid interest due under this note into shares of the company’s common stock at a 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.

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.

In the event of a default on the $300.0 million 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.

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.

The terms of the fixed-rate promissory notes were amended and restated on August 31, 2022 to include a conversion feature that gives each lender the right at any time, at its sole option (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.

The conversion of some or all of the aforementioned promissory notes, to the extent we deliver shares upon conversion, at a time when the company’s common stock is valued at greater than $2.28 per share (with respect to the $30.0 million promissory note) and $5.67 per share (with respect to the $300.0 million promissory note and fixed-rate promissory notes) would dilute the ownership interests of existing stockholders.

Any sales in the public market of the promissory notes or our common stock issuable upon conversion of the promissory notes could adversely affect prevailing market prices of our common stock.

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Under this model, the company calculated a gain on extinguishment of $82.9 million, representing the difference between the fair value of the new and amended promissory notes and the carrying value of the extinguished debt, net of any unamortized related-party notes discounts plus the cash proceeds from the new promissory note.

Since the debt was obtained from entities under common control, such gain was recorded in additional paid-in capital, on the condensed consolidated statement of stockholders’ deficit for the three months ended March 31, 2023.

Also, the difference between the principal and accrued interest outstanding as of the date of amendment and the fair value of the new and amended promissory notes was recorded as a debt discount to be amortized as interest expense over the remaining term (or until conversion).

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GAAP to certain financial instruments with characteristics of liability and equity.

In addition, the new guidance requires diluted earnings per share (diluted EPS) calculations be prepared using the if-converted method instead of the treasury stock method.

In addition, the new guidance requires diluted earnings per share (EPS) calculations be prepared using the if-converted method instead of the treasury stock method.

Under the if-converted method, the denominator of the diluted EPS calculation is adjusted to reflect the full number of common shares issuable upon conversion, assuming the effect is dilutive, while the numerator is adjusted to add back interest expense (after-tax) for the period.

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In December 2022, we completed a registered direct offering of 9,090,909 shares, raising approximately $47.0 million in net proceeds.

In connection with the sale of our common stock, we entered into a warrant agreement that allows the investor to purchase up to 9,090,909 shares at an exercise price of $6.60 per share.

The warrants are immediately exercisable and expire two years after the initial issuance date.

In connection with the sale of our common stock, we entered into a warrant agreement that allows the investor to purchase up to 9,090,909 shares of our common stock at an exercise price of $6.60 per share.

The warrants became immediately exercisable on December 12, 2022 and expire two years after the issuance date on December 12, 2024.

In February 2023, we completed a registered direct offering of 14,072,615 shares, raising approximately $47.0 million in net proceeds.

In connection with the sale of our common stock, we entered into a warrant agreement that allows the investors to purchase up to 14,072,615 shares at an exercise price of $4.26 per share.

The warrants are immediately exercisable and expire two years after the initial issuance date.

We account for the warrants as a derivative instrument, and changes in the fair value of the warrants are included in other income (expense), net , on the condensed consolidated statement of operations for each reporting period.

At March 31, 2023, the fair value of warrant liabilities included in the company’s condensed consolidated balance sheet was $17.8 million.

In connection with the sale of our common stock, we entered into a warrant agreement that allows the investors to purchase up to 14,072,615 shares of our common stock at an exercise price of $4.2636 per share.

The warrants became immediately exercisable on February 17, 2023 and expire two years after the issuance date on February 17, 2025.

The company reduced the exercise price of the February 2023 Warrants 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.

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.

See Part I, Item 2.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Subsequent Events,” for further information.

On July 20, 2023, we completed a registered direct offering of 14,569,296 shares, generating gross proceeds of approximately $40.0 million before deducting placement agent fees and other estimated offering costs.

In connection with the sale of our common stock, we entered into a warrant agreement that allows the investors to purchase up to 14,569,296 shares of our common stock at an exercise price of $3.2946 per share.

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

We account for the warrants as a derivative instrument, and changes in the fair value of the warrants are included in other (expense) income, net , on the condensed consolidated statement of operations for each reporting period.

At June 30, 2023, the fair value of warrant liabilities included in the company’s condensed consolidated balance sheet was $27.8 million.

We used the Black-Scholes option pricing model to determine the fair value of the warrants.

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Because of the numerous risks and uncertainties associated with our product development efforts, we are unable to predict when we may become profitable, if at all.

Since the commencement of our operations, we have incurred significant losses each year, and, as of March 31, 2023 we had an accumulated deficit of $2.5 billion.

Since the commencement of our operations, we have incurred significant losses each year, and, as of June 30, 2023 we had an accumulated deficit of $2.6 billion.

We expect to continue to incur significant expenses as we seek to expand our business, including in connection with conducting research and development across multiple therapeutic areas, participating in clinical trial activities, continuing to acquire or in-license technologies, maintaining, protecting and expanding our intellectual property, seeking regulatory approvals, increasing our manufacturing capabilities and, upon successful receipt of FDA approval, commercializing our products.

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If we are required by the FDA or any equivalent foreign regulatory authority to perform clinical trials or studies in addition to those we currently expect to conduct, or if there are any delays in completing the clinical trials of our product candidates, our expenses could increase substantially.

We have submitted a BLA 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, which was accepted by the FDA for review with 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 Part I, Item 2 “ Management’s Discussion and Analysis — Subsequent Events .

We have submitted a BLA 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.

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 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, for commercialization and even if approved, the resulting revenue may not enable us to achieve profitability.

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We have not conducted a complete study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study.

If we have experienced a change of control, as defined by Section 382, at any time since inception (including as a result of the Merger), utilization of the NOL carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382.

If we have experienced a change of control, as defined by Section 382, at any time since inception (including as a result of the March 2021 merger which pursuant to which NantKwest and NantCell combined their businesses ), utilization of the NOL carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382.

Any limitation may result in expiration of a portion of the NOL carryforwards or research and development tax credit carryforwards before utilization.

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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 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 Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events .” It is unclear when the FDA will approve our BLA, if at all.

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

We have invested a significant portion of our efforts and financial resources in the development of our main product candidates, N-803, our novel antibody cytokine fusion protein , saRNA and second-generation hAd5 vaccine candidates, and aldoxorubicin, some of which are used in combination with our NK cell therapy candidates.

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We currently generate no meaningful revenues from the sale of any product candidates, and we may never be able to develop or commercialize a product.

The CRL we received from the FDA for the BLA has delayed, and may decrease the likelihood of, ultimate approval and successful commercialization 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 in the U.S.

and potentially other markets.

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 PDUFA action date of May 23, 2023.

On May 9, 2023, the FDA delivered a CRL to us regarding the BLA, indicating that it 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 our 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.

We have submitted a formal meeting request and the associated briefing book to the FDA, and plan to diligently address and resolve the issues identified and seek approval as expeditiously as possible.

Notwithstanding these efforts, we and/or our third-party CMOs may be unable to adequately address and resolve the issues raised in the CRL.

Further, there is uncertainty regarding the timing, contents, and outcome of the requested FDA meeting, the FDA may disagree with our proposed approach for the BLA resubmission, and the timeline of FDA review of any resubmission remains uncertain.

The CRL and any subsequent resulting delay in the development and approval of such product candidate may prevent, decrease and/or delay expected revenue.

Any of these risks could have a material impact on our business, operating results, and financial condition.

There can be no assurance that we will complete a strategic partnership transaction on acceptable terms in accordance with our anticipated timeline, or at all.

As previously disclosed, we have been exploring partnering with a large biopharmaceutical company for commercialization of N-803 for intravesical administration with a view of completing such a transaction during 2023.

While we have confirmed with the potential partner that the negotiations will continue notwithstanding the CRL that we received from the FDA, there is a risk that our ability to enter into such a strategic partnership may be impacted by the CRL.

Further, there are other factors that may impact our ability, or decision, to enter into such a strategic partnership, and ultimately there can be no assurance that we will complete a transaction on acceptable terms in accordance with our anticipated timeline, or at all.

If we do not execute a strategic partnership transaction in the near-term, it would eliminate a potential source of near-term funding, and may impact our ability to raise additional funds to meet our business needs.

In addition, there are significant risks involved with building and managing a commercial infrastructure on a stand-alone basis, which could materialize in the event we do not execute a strategic partnership transaction.

We are developing product candidates in combination with other therapies, which exposes us to additional risks.

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• effectively compete with other therapies or competitors;

• following launch, assure that our product will be used as directed and that additional unexpected safety risks will not arise.

• following launch, ensure that our product will be used as directed and that additional unexpected safety risks will not arise.

Even if the FDA approves N-803 for certain indications or in combination with other therapeutic products, and even if we obtain significant market share for it, because the potential target population may be small, we may never achieve profitability without obtaining regulatory approval for additional indications.

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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.

In 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 Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events .” It is unclear when the FDA will approve our BLA, if at all.

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.

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Currently we manufacture our product candidates, or we may use third-party CMOs or some of our related parties to manufacture our product candidates.

Our clinical trials will need to be conducted with product candidates and materials that were produced under cGMP and/or Good Tissue Practice regulations, which are enforced by regulatory authorities.

Our clinical trials will need to be conducted with product candidates and materials that were produced under cGMP and/or Good Tissue Practice (GTP) regulations, which are enforced by regulatory authorities.

Our product candidates may compete with other products and product candidates for access to manufacturing facilities.

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We may not be able to demonstrate sufficient comparability between products manufactured at different facilities to allow for inclusion of the clinical results from patients treated with products from these different facilities, in our product registrations.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA.

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.

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.

See Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events.

We also are required to register certain clinical trials and post the results of certain completed clinical trials on a government-sponsored database, ClinicalTrials.gov, within specified timeframes.

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Our or our CMOs’ manufacturing facilities may be unable to comply with our specifications, cGMP, and with other FDA, state, and foreign regulatory requirements, and there is no guarantee that we or our CMOs will be able to successfully pass all aspects of a pre-approval inspection by the FDA or other foreign regulatory authorities.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA.

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.

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.

See Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events.

” We may be unable to resolve the items outlined in the complete response letter in a timely manner, if at all, which could have a material impact on our results of operations, financial condition, and business.

Poor control of production processes can lead to the introduction of adventitious agents or other contaminants, or to inadvertent changes in the properties or stability of product candidates that may not be detectable in final product testing.

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We also may not successfully realize the anticipated benefits from the capital expenditure at such facilities based on factors such as delays and uncertainties regarding development, regulatory approval and commercialization of our product candidates, as well as the potential to lose access to the leased facilities.

Further, in the future if we transition from our current CMOs to our own manufacturing facilities for one or more of our product candidates, including 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, for which we submitted a BLA in May 2022, we may need to conduct additional preclinical, analytical or clinical trials and obtain FDA approval before such manufacturing changes are implemented.

Further, in the future if we transition from our current CMOs to our own manufacturing facilities, or to alternative third-party CMOs, for one or more of our product candidates, including 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, we may need to conduct additional preclinical, analytical or clinical trials and obtain FDA approval before such manufacturing changes are implemented.

If we are unsuccessful in demonstrating the comparability of supplies before and after a manufacturing change, such manufacturing change can result in a delay or disruption in our clinical development plan or our ability to commercialize any approved product.

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However, unless we can reduce those costs to an acceptable amount, we may never be able to develop a commercially viable product.

If we do not successfully develop and commercialize products based upon our approach or find suitable and economical sources for materials used in the production of our potential products, we will not become profitable, which would materially and adversely affect the value of our common stock.

If we do not successfully develop and commercialize products based upon our approach or find suitable and economical sources for materials

used in the production of our potential products, we will not become profitable, which would materially and adversely affect the value of our common stock.

Our N-803 therapies and our other therapies may be provided to patients in combination with other agents provided by third parties or our affiliates.

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Accordingly, our competitors may be more successful in obtaining approval of treatments and achieving widespread market acceptance, rendering our treatments obsolete or non-competitive, possibly even before we are able to enter the market.

Accelerated merger and acquisition activity in the biotechnology and biopharmaceutical industries may result in even more resources being concentrated among a smaller number of our competitors.

Accelerated merger and acquisition activity in the biotechnology and biopharmaceutical industries may result in even more resources being concentrated among a smaller number of

our competitors.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

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Market acceptance of our product candidates by the medical community, patients and third-party payors will depend on a number of factors, some of which are beyond our control.

For example, physicians are often reluctant to switch their patients, and patients may be reluctant to switch from, existing therapies even when new and potentially more effective or safer treatments enter the market.

For example, physicians are often reluctant to switch their patients, and patients may be reluctant to

switch from existing therapies even when new and potentially more effective or safer treatments enter the market.

Efforts to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources and may not be successful.

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For our small molecular product candidates, if qualified, the regulatory exclusivity period is less than for our biologic product candidates.

The Federal Food, Drug, and Cosmetic Act (FDCA) provides a five-year period of non-patent marketing exclusivity within the U.S.

The Federal Food, Drug, and Cosmetic Act (FFDCA) provides a five-year period of non-patent marketing exclusivity within the U.S.

to the first applicant to gain approval of an NDA for a drug where the FDA has not previously approved any other new drug containing the same active molecule or ion responsible for the action of the drug substance.

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The secure processing, maintenance and transmission of this information is critical to our operations.

The multitude and complexity of our computer systems and those of our contract research organizations (CROs), CMOs, clinical sites or other contractors or consultants make them inherently vulnerable to service interruption or destruction, malicious intrusion and random attack.

The multitude and complexity of our computer systems and those of our CROs, CMOs, clinical sites or other contractors or consultants make them inherently vulnerable to service interruption or destruction, malicious intrusion and random attack.

Data privacy or security breaches by third parties, employees, contractors or others may pose a risk that sensitive data, including our intellectual property, trade secrets or personal information of our employees, patients, or other business partners may be exposed to unauthorized persons or to the public.

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Any such event could also result in legal claims or proceedings, liability under laws that protect the privacy of personal information and significant regulatory penalties, and damage to our reputation and a loss of confidence in us and our ability to conduct clinical trials.

Our business could be adversely affected by the effects of health epidemics, pandemics or contagious diseases, including the recent COVID‑19 pandemic and the public and governmental effort to mitigate against the spread of the disease, in regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other business operations, and may have a material adverse effect, on our clinical trials, operations, supply chains, distribution systems, product development, business and results of operations.

Our business could be adversely affected by the effects of health epidemics, pandemics or contagious diseases, including the recent COVID‑19 pandemic, which may have a material adverse effect, on our clinical trials, operations, supply chains, distribution systems, product development, business and results of operations.

Outbreaks of epidemic, pandemic or contagious diseases, such as the ongoing COVID ‑ 19 pandemic, and measures taken in response by governments and businesses worldwide to contain its spread have adversely impacted and may continue to significantly disrupt our operations and adversely affect our business, financial condition and results of operations.

Many countries including the U.S.

implemented measures such as quarantine, shelter-in-place, curfew, travel and activity restrictions and similar isolation measures, including government orders and other restrictions on the conduct of business operations.

The continued spread of this pandemic has caused significant volatility and uncertainty in the U.S.

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Any resurgence in COVID-19 infections could result in the imposition of new mandates and prolonged restrictive measures implemented in order to control the spread of the disease.

President Biden has issued an Executive Order requiring federal employees and covered contractors to be vaccinated against COVID-19.

Additionally, on November 4, 2021, the U.S.

Department of Labor’s Occupational Safety and Health Administration (OSHA) issued a COVID-19 Vaccination and Testing Emergency Temporary Standard requiring all employers with 100 or more employees to ensure that their employees are fully vaccinated or tested for COVID-19 on at least a weekly basis.

On January 20, 2022, The U.S.

Supreme Court invalidated this requirement.

However additional vaccine and testing mandates may be announced in other jurisdictions in which we operate our business.

While it is not currently possible to predict with any certainty the exact impact the new regulations would have on us and our suppliers, the implementation of such government mandated vaccination or testing mandates may impact our ability to retain current employees and attract new employees and result in labor disruptions.

We are monitoring a number of risks related to this pandemic, including the following:

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The operations of the FDA or other regulatory agencies may be adversely affected.

The legislative and regulatory environment governing our businesses is dynamic and changing frequently in response to COVID ‑ 19.

The legislative and regulatory environment governing our businesses is dynamic and changes frequently in response to COVID ‑ 19.

In response to COVID ‑ 19, federal, state and local governments are issuing new rules, regulations, orders and advisories on a regular basis.

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Any failure by our third-party manufacturers to comply with cGMP or maintain a compliance status acceptable to the FDA or other regulatory authorities or failure to scale up manufacturing processes, including any failure to deliver sufficient quantities of product candidates in a timely manner, could lead to a delay in, or failure to obtain, regulatory approval of any of our product candidates.

On May 9, 2023, the FDA delivered a complete response letter to us regarding the BLA.

The letter indicated 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 contract manufacturing organizations.

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.

See Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events.

In addition, our third-party manufacturers will be subject to periodic inspections by the FDA and other regulatory authorities, and failure to comply with cGMP could be the basis for the FDA to issue a warning or untitled letter, withdraw approvals for product candidates previously granted to us, or take other regulatory or legal action, including a request to recall or seize product candidates, total or partial suspension of production, suspension of clinical trials, refusal to approve pending applications or supplemental applications, detention of product, refusal to permit the import or export of product candidates, injunction, imposing civil penalties or pursuing criminal prosecution.

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Competing product candidates, either developed by the collaborators or strategic partners or to which the collaborators or strategic partners have rights, may result in the withdrawal of our collaborator’s or partner’s support for our product candidates.

For example, in 2019, Sorrento Therapeutics, Inc.

with which we jointly established a new entity called Immunotherapy NANTibody, LLC as a stand-alone biotechnology company, commenced litigation against us and certain of our officers and directors, alleging that we improperly caused NANTibody to acquire IgDraSol.

For example, in 2019, Sorrento with which we jointly established a new entity called Immunotherapy NANTibody, LLC as a stand-alone biotechnology company, commenced litigation against us and certain of our officers and directors, alleging that we improperly caused NANTibody to acquire IgDraSol.

Additionally, in 2020, we received a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration, served by Shenzhen Beike Biotechnology Co.

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

Soon-Shiong focuses heavily on our matters and is highly active in our management, he does devote a significant amount of his time to a number of different endeavors and companies, including NantHealth, Inc., NantMedia Holdings, LLC (which operates the Los Angeles Times and the San Diego Union-Tribune) and NantWorks, which is a collection of multiple companies in the healthcare and technology space.

Soon-Shiong focuses heavily on our matters and is highly active in our management, he does devote a significant amount of his time to a number of different endeavors and companies, including NantHealth, Inc., NantMedia Holdings, LLC (which operates the Los Angeles Times) and NantWorks, which is a collection of multiple companies in the healthcare and technology space.

The risks related to our dependence upon Dr.

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• differing payor reimbursement regimes, governmental payors or patient self-pay systems, and price controls;

• potential liability under the FCPA or comparable foreign regulations;

• potential liability under the Foreign Corrupt Practices Act (FCPA) or comparable foreign regulations;

• challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the U.S.;

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(Exyte) in New York state court arising from a construction agreement Exyte entered with Athenex pertaining to construction of the Dunkirk Facility.

We believe we are entitled to defense costs and indemnification and, accordingly, we have provided notice to Athenex.

In April 2023, Athenex announced that it had appointed a Chief Restructuring Officer to support Athenex’s ongoing review of strategic alternatives.

we are entitled to defense costs and indemnification and, accordingly, we have provided notice to Athenex.

On May 14, 2023, Athenex, together with certain of its subsidiaries, filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Court for the Southern District of Texas.

The extent of the impact of the Athenex Proceedings and its automatic stay will have on any continuing obligations Athenex may have under the purchase agreement remain unclear.

We further believe Exyte’s claims against us are without merit, and we intend to defend the claims vigorously.

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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 Part I, Item 2 “ Management’s Discussion and Analysis — Subsequent Events.

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

If the FDA requires additional data, finds that the CMC information in the BLA is deficient, disagrees with our interpretation or analysis of clinical data, identifies any deficiency in our clinical data, or finds deficiencies in our pre-approval inspection, we may fail to obtain approval of the BLA 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, or approval may be delayed.

The letter referenced above noted deficiencies related to the FDA’s pre-license inspection of the company’s third-party contract manufacturing organizations.

The letter referenced above noted deficiencies related 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.

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Manufacturing finished drug products, especially in large quantities, is complex.

If our product candidates receive regulatory approval, they will require several manufacturing steps and may involve complex techniques to assure quality and sufficient quantity, especially as the manufacturing scale increases.

If our product candidates receive regulatory approval, they will require several manufacturing steps and may involve complex techniques to ensure quality and sufficient quantity, especially as the manufacturing scale increases.

Our product candidates will need to be made consistently and in compliance with a clearly defined manufacturing process pursuant to FDA regulations.

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listing commercially distributed products with the FDA;

complying with cGMP under Quality Systems Regulations;

complying with cGMP under Quality System Regulation (QSR);

filing reports with the FDA of and keeping records relative to certain types of adverse events associated with devices under the medical device reporting regulation;

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Our failure to comply with state, national and/or international data protection laws and regulations could lead to government enforcement actions and significant penalties against us, and adversely impact our operating results.

There are numerous laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns, and some state privacy laws apply more broadly than the Health Insurance Portability and Accountability Act (HIPAA) and associated regulations.

For example, California recently enacted legislation—the California Consumer Privacy Act of 2018 (CCPA)—which went into effect on January 1, 2020.

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and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our product candidates profitably.

These changes included aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2031, with the exception of a temporary suspension implemented under various COVID‑19 relief legislation from May 1, 2020 through March 31, 2022.

Under current legislation, the actual reduction in Medicare payments can vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester.

The Consolidated Appropriations Act, 2023, extends the 2% Medicare sequester for the first six months of the fiscal year ending December 31, 2032 and revises the sequester percentage up to 2% for the fiscal years ending December 31, 2030 and 2031.

In January 2013, the American Taxpayer Relief Act of 2012 (ATRA) was approved which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

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• HIPAA, which created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud healthcare programs;

• HIPAA, as amended by HITECH, which imposes requirements on certain types of people and entities relating to the privacy, security, and transmission of individually identifiable PHI, and requires notification to affected individuals and regulatory authorities of certain breaches of security of PHI;

• HIPAA, as amended by the Health Information Technology for Economic and Clinical Health (HITECH) Act, which imposes requirements on certain types of people and entities relating to the privacy, security, and transmission of individually identifiable Protected Health Information (PHI), and requires notification to affected individuals and regulatory authorities of certain breaches of security of PHI;

• the federal Physician Payment Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, to report annually to the Centers for Medicare & Medicaid Services (CMS) information related to payments and other transfers of value to covered recipients, including physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), other healthcare providers (such as physician assistants and nurse practitioners) and teaching hospitals, and ownership and investment interests held by physicians and their immediate family members, which is published in a searchable form on an annual basis;

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We may be required to participate in such interference or derivation proceedings involving our issued patents and pending applications.

We may also be required to participate in post-grant challenge proceedings, such as oppositions in a foreign patent office, that challenge our or our licensor’s priority of invention or other features of patentability with respect to our owned or in‑licensed patents and patent applications.

We may also be required to participate in post-grant challenge proceedings, such as oppositions in a foreign patent office, which challenge our or our licensor’s priority of invention or other features of patentability with respect to our owned or in‑licensed patents and patent applications.

Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our N-803, saRNA, hAd5 and yeast technologies, cell-based therapies or other product candidates and technologies.

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Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources, including our scientists and management, from our business.

An adverse result in any litigation or defense proceeding could put one or more of our owned or licensed patents at risk of being invalidated, held unenforceable, or interpreted narrowly, and could put our patent applications at risk of not issuing.

Such proceedings could result in revocation or cancellation of, or amendment to, our patents in such a way that they no longer cover our product candidates or technologies.

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As is the case with other immunotherapy and biopharmaceutical companies, our success is dependent on intellectual property, particularly patents.

Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain.

Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain.

In addition, the U.S.

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Assuming that other requirements for patentability are met, prior to March 2013, in the U.S., the first to invent the claimed invention was entitled to the patent, while outside the U.S., the first to file a patent application was entitled to the patent.

After March 2013, under the Leahy-Smith America Invents Act (the America Invents Act) enacted in September 2011, the U.S.

After March 2013, under the Leahy-Smith America Invents Act (America Invents Act) enacted in September 2011, the U.S.

transitioned to a first-to-file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention.

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License agreements may not provide exclusive rights to use certain licensed intellectual property and technology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our technology and product candidates in the future.

As a result, we may not be able to prevent competitors or other third parties from developing and commercializing competitive products that also utilizes technology that we have in-licensed.

As a result, we may not be able to prevent competitors or other third parties from developing and commercializing competitive products that also utilize technology that we have in-licensed.

In addition, subject to the terms of any such license agreements, we do not have the right to control the preparation, filing, prosecution and maintenance, and we may not have the right to control the enforcement, and defense of patents and patent applications covering the technology that we license from third parties.

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We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets, or other intellectual property, including as an inventor or co-inventor.

For example, we or our licensors may have disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our product candidates.

For example, we or our licensors may have disputes arising from conflicting obligations of employees, consultants or others who are involved in developing our product candidates.

Litigation may be necessary to defend against these and other claims challenging inventorship, or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property.

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Soon-Shiong, through his direct and indirect ownership of the company’s common stock, has voting control of the company.

As of March 31, 2023, Dr.

As of June 30, 2023, Dr.

Soon-Shiong and his affiliates own approximately 73.4% of the company’s common stock outstanding.

As of March 31, 2023, the company has a $300.0 million promissory note with an entity affiliated with Dr.

As of June 30, 2023, the company has a $300.0 million promissory note with an entity affiliated with Dr.

Soon-Shiong that is due and payable on December 31, 2023.

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 price of $5.67 per share.

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, entities affiliated with Dr.

Soon-Shiong hold fixed-rate promissory notes representing $264.9 million in indebtedness (including principal and accrued and unpaid interest) as of March 31, 2023.

Soon-Shiong hold fixed-rate promissory notes representing $267.5 million in indebtedness (including principal and accrued and unpaid interest) as of June 30, 2023.

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.

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Soon-Shiong and his related party have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

Soon-Shiong also has a total of 1,626,064 stock options outstanding as of March 31, 2023, of which 1,159,398 are exercisable and 466,666 are unvested and unexercisable.

Soon-Shiong also has a total of 1,626,064 stock options outstanding as of June 30, 2023, of which 1,159,398 are exercisable and 466,666 are unvested and unexercisable.

Soon-Shiong is in a position to control the outcome of corporate actions that require, or may be accomplished by, stockholder approval, including amending the bylaws of the company, the election or removal of directors and transactions involving a change of control.

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This type of litigation could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.

We are currently subject to securities class action litigation and may be subject to similar or other litigation in the future, all of which will require significant management time and attention, result in significant legal expenses and may result in unfavorable outcomes, which may have a material adverse effect on our business, operating results and financial condition, and negatively affect the price of our common stock.

We are, and may in the future become, subject to various legal proceedings and claims that arise in or outside the ordinary course of business.

For example, on June 30, 2023, a putative securities class action complaint, captioned Salzman v.

ImmunityBio, Inc.

3:23-cv-01216-BEN-WVG, was filed in the U.S.

District Court for the Southern District of California against the Company and three of its officers and/or directors, asserting violations of Sections 10(b) and 20(a) of the Exchange Act.

Stemming from the company’s disclosure on May 11, 2023 that it had received an FDA CRL stating, among other things, that it could not approve the company’s 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, in its present form due to deficiencies related to its pre-license inspection of the company’s third-party CMOs, the complaint alleges that the defendants had previously made materially false and misleading statements and/or omitted material adverse facts regarding its third-party clinical manufacturing organizations and the prospects for regulatory approval of the BLA.

The results of the securities class action lawsuit, and any future legal proceedings cannot be predicted with certainty.

Also, our insurance coverage may be insufficient, our assets may be insufficient to cover any amounts that exceed our insurance coverage, and we may have to pay damage awards or otherwise may enter into a settlement arrangement in connection with such claim.

Any such payments or settlement arrangements in current or future litigation could have a material adverse effect on our business, operating results or financial condition.

Even if the plaintiffs’ claims are not successful, current or future litigation could result in substantial costs and significantly and adversely impact our reputation and divert management’s attention and resources, which could have a material adverse effect on our business, operating results and financial condition, and negatively affect the price of our common stock.

In addition, such lawsuits may make it more difficult to finance our operations.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plan, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

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In addition, our Executive Chairman and Global Chief Scientific and Medical Officer, Dr.

Soon-Shiong, and his affiliates currently own approximately 74.2% of our outstanding shares of common stock as of March 31, 2023.

Soon-Shiong, and his affiliates currently own approximately 73.4% of our outstanding shares of common stock as of June 30, 2023.

Sales of stock by Dr.

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Any sales of securities by these stockholders could have an adverse effect on the market price of our common stock.

In addition, we expect that additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating as a public company.

To raise capital, we may sell common stock, convertible securities or other equity securities (including warrants) in one or more transactions at prices and in a manner we determine from time to time.

If we sell common stock, convertible securities or other equity securities (including warrants), new investors could gain rights, preferences and privileges senior to the holders of our common stock.

In addition, we expect that additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, regulatory approval efforts, pre-commercialization activities, expanded research and development activities and costs associated with operating as a public company.

To raise capital, we may sell common stock, including as part of our ATM, convertible securities or other equity securities (including warrants) in one or more transactions at prices and in a manner we determine from time to time.

If we sell common stock, convertible securities or other equity securities, existing investors may be materially diluted, and new investors could gain rights, preferences and privileges senior to the holders of our common stock.

The issuance of additional shares of common stock or warrants to purchase common stock, perception that such issuances may occur, or exercise of outstanding warrants or other equity securities will have a material dilutive impact on existing stockholders and could have a material negative effect on the market price of our common stock.

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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 Part I, Item 2 “ Management’s Discussion and Analysis —Subsequent Events.

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

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An “interested stockholder” is a person who, together with affiliates and associates, owns (or, in certain cases, within three years prior, did own) 15% or more of the corporation’s voting stock.

Our decision not to be subject to Section 203 will allow, for example, our Executive Chairman and Global Chief Scientific and Medical Officer (who, with members of his immediate family and entities affiliated with him, currently own, in the aggregate, approximately 74.2% of our common stock as of March 31, 2023) to transfer shares in excess of 15% of our voting stock to a third-party free of the restrictions imposed by Section 203.

Our decision not to be subject to Section 203 will allow, for example, our Executive Chairman and Global Chief Scientific and Medical Officer (who, with members of his immediate family and entities affiliated with him, currently own, in the aggregate, approximately 73.4% of our common stock as of June 30, 2023) to transfer shares in excess of 15% of our voting stock to a third-party free of the restrictions imposed by Section 203.

This may make us more vulnerable to takeovers that are completed without the approval of our Board of Directors and/or without giving us the ability to prohibit or delay such takeovers as effectively.

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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 1A. Risk Factors