ImmunityBio, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Forward-Looking Statements The following discussion and analysis should be read together with our condensed consolidated financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Exchange Act that are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations. Forward-looking statements include, but are not limited to: • our ability to develop next-generation therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases; • our ability to 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; • our expectations regarding the operation and effectiveness of our product candidates and related benefits; • our ability to utilize multiple modes to induce cell death; • our beliefs regarding the benefits and perceived limitations of competing approaches, and the future of competing technologies and our industry; • details regarding our strategic vision and planned product candidate pipeline, including that we eventually plan to advance vaccines and therapies for virally-induced infectious diseases; • our beliefs regarding the success, cost and timing of our product candidate development activities and current and future clinical trials and studies, including study design and the enrollment of patients; • the timing of the development and commercialization of our product candidates; • our expectations regarding our ability to utilize the Phase 1/2 aNK and haNK ® clinical trials data to support the development of our product candidates, including our haNK, taNK, t‑haNK ™ , MSC, and M-ceNK ™ product candidates; • our expectations regarding the development, application, commercialization, marketing, prospects and use generally of our product candidates, including Anktiva, 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 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; • the ability and willingness of strategic collaborators to share our vision and effectively work with us to achieve our goals; • the ability and willingness of various third parties to engage in research and development activities involving our product candidates, and our ability to leverage those activities; • our ability to attract additional third-party collaborators; • our expectations regarding the ease of administration associated with our product candidates; 42 Table of Contents • our expectations regarding patient compatibility associated with our product candidates; • our beliefs regarding the potential markets for our product candidates and our ability to serve those markets; • our expectations regarding the timing of enrollment and submission of our clinical trials, and protocols related to such trials; • our ability to produce an antibody cytokine fusion protein, a DNA, RNA, or recombinant protein vaccine, a toll-like receptor-activating adjuvant, an NK-cell or T-cell therapy, or a damage-associated molecular patterns (DAMP) inducer therapy; • our beliefs regarding the potential manufacturing and distribution benefits associated with our product candidates, and our ability to scale up the production of our product candidates; • our plans regarding our manufacturing facilities and our belief that our manufacturing is capable of being conducted in‑house; • our belief in the potential of our antibody cytokine fusion proteins, DNA, RNA or recombinant protein vaccines, toll-like receptor-activating adjuvants, NK-cell therapies, or DAMP inducer platforms, and the fact that our business is based upon the success individually and collectively of these platforms; • our belief regarding the magnitude or duration for additional clinical testing of our antibody cytokine fusion proteins, DNA, RNA or recombinant protein vaccines, toll-like receptor-activating adjuvants, NK-cell therapies, or DAMP inducers along with other product candidate families; • even if we successfully develop and commercialize specific product candidates like our N-803 or PD-L1 t‑haNK, our ability to develop and commercialize our other product candidates either alone or in combination with other therapeutic agents; • the ability to obtain and maintain regulatory approval of any of our product candidates, and any related restrictions, limitations and/or warnings in the label of any approved product candidate; • our ability to commercialize any approved products; • the rate and degree of market acceptance of any approved products; • our ability to attract and retain key personnel; • the accuracy of our estimates regarding our future revenue, as well as our future operating expenses, capital requirements and needs for additional financing; • our ability to obtain, maintain, protect and enforce intellectual property protection for our product candidates and technology and not infringe upon, misappropriate or otherwise violate the intellectual property of others; • the terms and conditions of licenses granted to us and our ability to license additional intellectual property relating to our product candidates and technology; • the impact on us, if any, if the CVRs held by former Altor stockholders become due and payable in accordance with their terms; • regulatory developments in the U.S. and foreign countries; and • any impact of the coronavirus pandemic, or responses to the pandemic, on our business, clinical trials or personnel. Forward-looking statements include statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “seeks,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” or similar expressions and the negatives of those terms. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and although we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted a thorough inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements. 43 Table of Contents Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. Anktiva, ceNK, Conkwest, GlobeImmune, GlobeImmune (logo), haNK, haNK (Chinese characters), ImmunityBio, NantKwest, NK-92, Outsmart your disease, taNK, Tarmogen, VesAnktiva, and VivaBioCell are trademarks or registered trademarks of ImmunityBio, Inc., its subsidiaries, or its affiliates. Our product candidates, including N-803, are investigational. Safety and efficacy have not been established by any agency, including the FDA. This Quarterly Report on Form 10-Q contains references to our trademarks and trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us, by any other companies. In this Quarterly Report on Form 10-Q, “ImmunityBio,” “the company,” “we,” “us,” and “our” refer to ImmunityBio, Inc. and its subsidiaries. Our Business ImmunityBio, Inc. is a clinical-stage biotechnology company developing next-generation therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases. We strive to be a vertically-integrated immunotherapy company designing and manufacturing our products so they are more effective, accessible, more conveniently stored, and more easily administered to patients. Our broad immunotherapy and cell therapy platforms are designed to attack cancer and infectious pathogens by activating both the innate immune system—NK cells, dendritic cells, and macrophages—and the adaptive immune system—B cells and T cells—in an orchestrated manner. 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. Our ultimate goal is to employ this approach to establish an “immunological memory” that confers long-term benefit for the patient. Our business is based on the foundation of multiple platforms that collectively act on the entire immune response with the goal of targeted, durable, coordinated, and safe immunity against disease. These platforms and their associated product candidates are designed to overcome the limitations of the current standards of care in oncology and infectious diseases, such as checkpoint inhibitors and antiretroviral therapies. 44 Table of Contents Our portfolio includes: Our platforms include 13 novel therapeutic agents either in clinical trials or for which we are developing protocols. We are currently engaged in 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 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. We believe that our innovative approach to orchestrate and combine therapies for optimal immune system response will become a therapeutic foundation across multiple indications. Additionally, we believe that data from multiple clinical trials indicates N-803 has broad potential to enhance the activity of therapeutic monoclonal antibodies (mAbs), including checkpoint inhibitors (e.g., Keytruda), across a wide range of tumor types. 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 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. 45 Table of Contents COVID-19 Pandemic The COVID-19 pandemic continues to present a substantial public health and economic challenge around the world. Through the date of this Quarterly Report on Form 10-Q, we have not seen a material adverse impact to our business from the pandemic. However, given the unprecedented and continuously evolving nature of the pandemic, we cannot at this time predict the specific extent, duration, or full impact that this pandemic may have on our financial condition and results of operations, including ongoing and planned clinical trials. More specifically, the pandemic may result in prolonged impacts that we cannot predict at this time, and we expect that such uncertainties will continue to exist for the foreseeable future. The impact of the pandemic on our financial performance will depend on future developments, including the duration and spread of the outbreak, impact of potential variants and the related governmental advisories and restrictions. These developments and the impact of the ongoing pandemic on the financial markets and the overall economy are highly uncertain. If the financial markets and/or the overall economy are impacted for an extended period, our results may be adversely affected. In addition, we anticipate that enrollment of patients in certain studies will likely take longer than previously forecasted and that our clinical trials may require additional time to complete which would in turn impact the timeline of BLA submissions of our product candidates and subsequent revenue generation. These factors have been accounted for in the company’s anticipated upcoming milestones. During any such delays in our clinical trials, we will continue to incur fixed costs such as selling, general and administrative expenses and operating expenses related to our laboratory, GMP manufacturing, and office facilities. Many of our office-based employees have been working from home since mid-March 2020. Essential staffing levels for our research and development operations remain in place, including maintaining key personnel in our laboratory and GMP manufacturing facilities. It is likely that the pandemic and resulting mitigation efforts could have an impact in the future on our third-party suppliers who manufacture laboratory supplies required for our in-house manufacturing process, which in turn could have an impact on having sufficient clinical product supply available for our clinical trials. We have addressed this in part by ensuring that we have sufficient supplies on hand to weather interruptions in our supply chain. We continue to monitor the impact of the COVID-19 pandemic on our business, including our clinical trials, manufacturing facilities and capabilities, and ability to access necessary resources. For a discussion of the risks presented by the COVID-19 pandemic to our results of operations and financial condition, see Part II, Item 1A. “Risk Factors.” Operating Results From inception through the date of this Quarterly Report on Form 10-Q, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables, and grant programs. 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 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 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. For additional information, see Note 10 , Related-Party Agreements, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q. In anticipation of the commercialization of select drug candidates, we expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, which may fluctuate significantly from quarter-to-quarter and year-to-year. See “ — Future Funding Requirements ” below for a discussion of our anticipated expenditures and sources of capital we expect to access to fund these expenditures. 46 Table of Contents Collaboration Agreements We anticipate that strategic collaborations will continue to be an integral part of our operations, providing opportunities to leverage our partners’ expertise and capabilities to gain access to new technologies and further expand the potential of our technologies and product candidates across relevant platforms. We believe we are well positioned to become a leader in immunotherapy due to our broad and vertically-integrated platforms and through complementary strategic partnerships. We believe that our innovative approach to orchestrate and combine therapies for optimal immune system response will become a therapeutic foundation across multiple 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, across a wide range of tumor types. We may also enter into supply arrangements for various investigational agents to be used in our clinical trials. See Part I, Item 1. “ Business—Collaboration and License Agreements ”, of our Annual Report on Form 10-K filed with the SEC on March 1, 2023 for a more detailed discussion regarding our collaboration and license agreements. Agreements with Related Parties Our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, founded and has a controlling interest in NantWorks, which is a collection of companies in the healthcare and technology space. We have entered into arrangements with NantWorks, and certain affiliates of NantWorks. Affiliates of NantWorks are also affiliates of the company due to the common control by and/or common ownership interest of our Executive Chairman and Global Chief Scientific and Medical Officer. Related-Party Debt The following description of the company’s related-party 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. 47 Table of Contents Related-Party Convertible Note at Fair Value On March 31, 2023, the company executed a $30.0 million promissory note with Nant Capital. This note bears interest at Term SOFR plus 8.0% per annum. The outstanding principal amount and any accrued and unpaid interest are due on the 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. 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. The note is accounted for under ASC 825-10-15-4 FVO election. Under the FVO election, the note is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. With each such remeasurement, the note will be adjusted to fair value, with the change in fair value 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 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. In 2021, we completed a review of alternative structures that could support our more complex clinical trial requirements and made a decision to explore a potential transition of clinical trials at the Clinic to a new structure (including contracting with a new, non-affiliated professional corporation) to be determined and agreed upon by all parties. We continue productive negotiations with potential partners around alternative structures, but there can be no assurance that we will be successful. 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. 48 Table of Contents Components of our Results of Operations Revenue From inception through the date of this Quarterly Report on Form 10-Q, we have generated minimal revenue from non-exclusive license agreements related to our cell lines, the sale of our bioreactors and related consumables, and grant programs. 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. If we fail to complete the development of our product candidates in a timely manner or fail to obtain regulatory approval for them, we may never be able to generate substantial future revenue. Operating Expenses We generally classify our operating expenses into research and development, and selling, general and administrative expenses. Personnel costs, including salaries, benefits, bonuses, and stock-based compensation expense comprise a significant component of our research and development, and selling, general and administrative expense categories. We allocate expenses associated with our facilities and information technology costs between these two categories, primarily based on the nature of each cost. Research and Development Research and development expense consists of expenses incurred while performing research and development activities to discover and develop our technology and product candidates. This includes conducting preclinical studies and clinical trials, manufacturing development efforts and activities related to regulatory filings for product candidates. We recognize research and development expenses as they are incurred. Our research and development expenses primarily consist of: • clinical trial and regulatory-related costs; • expenses incurred under agreements with investigative sites and consultants that conduct our clinical trials; • expenses incurred under collaborative agreements; • manufacturing and testing costs and related supplies and materials; • employee-related expenses, including salaries, benefits, travel and stock-based compensation; and • facility expenses dedicated to research and development. The company classifies its research and development expenses as either external or internal. The company’s external research and development expenses support its various preclinical and clinical programs. The company’s internal research and development expenses include payroll and benefits expenses, facilities and equipment expense, and other indirect research and development expenses incurred in support of its research and development activities. The company’s external and internal resources are not directly tied to any one research or drug discovery program and are typically deployed across multiple programs and are not allocated to specific product candidates or development programs. We expect our research and development expenses to continue to increase significantly for the foreseeable future as we advance our product candidates through clinical development, including the conduct of our ongoing and any future clinical trials. 49 Table of Contents The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. The successful development of product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs required to complete the remaining development of any product candidates. This is due to the numerous risks and uncertainties associated with the development of product candidates. The costs of clinical trials may vary significantly over the life of a project owing to, but not limited to, the following: • per patient trial costs; • the number of sites included in the clinical trials; • the countries in which the clinical trials are conducted; • the length of time required to enroll eligible patients; • the number of patients that participate in the clinical trials; • the number of doses that patients receive; • the cost of comparative agents used in clinical trials; • the drop-out or discontinuation rates of patients; • potential additional safety monitoring or other studies requested by regulatory agencies; • the duration of patient follow-up; and • the safety profile and efficacy of the product candidate. We have only one product candidate, Anktiva in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, for which we submitted a BLA to the FDA in May 2022. 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. 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. Selling, General and Administrative Selling, general and administrative expense consists primarily of salaries and personnel-related costs, including employee benefits and any stock-based compensation, for employees performing functions other than research and development. This includes personnel in executive, finance, human resources, information technology, legal, and administrative support functions. Other selling, general and administrative expenses include facility-related costs not otherwise allocated to research and development expense, professional fees for auditing, tax and legal services, advertising costs, expenses associated with strategic business transactions and business development efforts, obtaining and maintaining patents, consulting costs, royalties and licensing costs, and costs of our information systems. We expect that our selling, general and administrative expense will increase for the foreseeable future as we expand operations, build out information systems and increase our headcount to support continued research activities and the development of our clinical programs. We have incurred and expect that we will continue to incur in the future, additional costs associated with operating as a public company, including costs to comply with stock exchange listing and SEC requirements, future funding efforts, corporate governance, internal controls, investor relations, disclosure and similar requirements applicable to public companies. Additionally, if and when we believe that a regulatory approval of a product candidate appears likely, we expect to incur significant increases in our selling, general and administrative expense relating to the sales and marketing of the approved product candidate. 50 Table of Contents Other Income and Expense Other income and expense consists primarily of interest income, interest expense, unrealized gains and losses on investments in equity securities and equity-method investments, realized gains and losses on both debt and equity securities, changes in fair value of warrant liabilities and related-party convertible note payable at fair value, and gains and losses on foreign currency transactions. Income Taxes We are subject to U.S. federal income tax, as well as income tax in Italy, South Korea, California and other states. From inception through 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 June 30, 2023 and 2022 Three Months Ended June 30, $ Change % Change 2023 2022 (Unaudited, $ in thousands) Revenue $ 41 $ 35 $ 6 17 % Operating expenses: Research and development (including amounts with related parties) 53,168 63,082 (9,914) (16) % Selling, general and administrative (including amounts with related parties) 32,018 16,575 15,443 93 % Total operating expenses 85,186 79,657 5,529 7 % Loss from operations (85,145) (79,622) (5,523) 7 % Other (expense) income, net: Interest and investment income, net (61) (1,800) 1,739 (97) % Interest expense (including amounts with related parties) (32,235) (9,698) (22,537) 232 % Loss on equity method investment (3,957) (3,900) (57) 1 % 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 with related parties) (28) 185 (213) (115) % Total other expense, net (53,068) (15,213) (37,855) 249 % Loss before income taxes and noncontrolling interests (138,213) (94,835) (43,378) 46 % Income tax expense — — — — % Net loss $ (138,213) $ (94,835) $ (43,378) 46 % Revenue 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. 51 Table of Contents Research and Development Expense 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 June 30, 2023 2022 $ Change (Unaudited, $ in thousands) External research and development expenses $ 11,380 $ 16,532 $ (5,152) Internal research and development expenses: Personnel-related costs 23,166 22,739 427 Equipment, depreciation, and facility costs 13,227 13,337 (110) Other research and development costs 5,395 10,474 (5,079) Total internal research and development expenses 41,788 46,550 (4,762) 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; and • 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. 52 Table of Contents 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 2023 2022 (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 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. 53 Table of Contents 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 June 30, 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 $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; and • 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. 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 $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. 54 Table of Contents Other Expense, Net 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 Sources of Liquidity Our principal sources of liquidity are our existing cash, cash equivalents, and marketable securities. We have historically invested our cash primarily in investment grade short- to intermediate-term corporate debt securities, commercial paper, government-sponsored securities, U.S. treasury securities, and foreign government bonds and classify these investments as available-for-sale. Certain of these investments are subject to general credit, liquidity and other market risks. The general condition of the financial markets and the economy may increase those risks and may affect the value and liquidity of investments and restrict our ability to access the capital markets. Cash and Marketable Securities on Hand 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 During February 2023, we filed a $750.0 million shelf registration statement with the SEC on Form S-3 for the offering and sale of equity and equity-linked securities, including common stock, preferred stock, debt securities, depositary shares, warrants to purchase common stock, preferred stock or debt securities, subscription rights, purchase contracts, and units. In February 2023, we sold shares of our common stock and warrants valued at $110.0 million under the shelf. As of 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. 55 Table of Contents 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. 56 Table of Contents 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. Furthermore, changing circumstances may cause us to increase our spending significantly faster than we currently anticipate, and we may need to raise even greater amounts of funds sooner if we choose to expand more rapidly than we presently anticipate. Moreover, our fixed expenses such as rent and other contractual commitments are substantial and are expected to increase in the future. 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 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. Soon-Shiong. 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 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. 57 Table of Contents The remaining $267.5 million is due and payable on September 30, 2025, including any accrued and unpaid interest. The company can prepay the outstanding principal (together with accrued and unpaid interest), in whole or in part, at any time without premium or penalty and without the prior consent of the lender. On August 31, 2022, the terms of these fixed-rate promissory notes were amended and restated to include a conversion feature that gives each lender, at its sole option, at any time (other than when the lender is in receipt of a written notice of prepayment from the borrower), the right to convert the entire outstanding principal amount and accrued and unpaid interest due under each note at the time of conversion into shares of the company’s common stock at a price of $5.67 per share. Upon receipt of a written notice of prepayment from the borrower, the lender has the right, at its option, to convert the outstanding principal amount to be prepaid and the accrued and unpaid interest thereon (as specified in the notice of prepayment) into shares of the company’s common stock at a price of $5.67 per share. There can be no assurance that the company can refinance these promissory notes or what terms will be available in the market at the time of refinancing. Furthermore, if prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then the interest expense relating to the refinanced indebtedness would increase. These risks could materially adversely affect the company’s financial condition, cash flows and results of operations. • In connection with our 2017 acquisition of Altor, we issued CVRs under which we agreed to pay the prior stockholders of Altor approximately $304.0 million of contingent consideration upon the successful regulatory approval of a BLA by the FDA, or foreign equivalent, for N-803 by December 31, 2022, and approximately $304.0 million of contingent consideration upon calendar-year worldwide net sales of N-803 exceeding $1.0 billion prior to December 31, 2026, with amounts payable in cash or shares of our common stock or a combination thereof. With respect to the regulatory milestone CVR agreement, in May 2022 we announced the submission of a BLA to the FDA for our product candidate, Anktiva (N-803) in combination with BCG for the treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease . 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 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 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. We may be required to pay the other prior Altor stockholders up to $164.2 million for their net sales CVRs should they choose to have their CVRs paid in cash instead of common stock. We may need to seek additional sources of capital to satisfy the CVR obligations if they are achieved. • In connection with our acquisition of VivaBioCell, we are obligated to pay the former owners approximately $2.2 million of contingent consideration upon the achievement of a regulatory milestone relating to the GMP-in-a-Box technology. 58 Table of Contents Discussion of Condensed Consolidated Cash Flows The following discussion of ImmunityBio’s cash flows is based on the condensed consolidated statements of cash flows in Item 1. “Financial Statements” and is not meant to be an all‑inclusive discussion of the changes in its cash flows for the periods presented below. The following table sets forth our primary sources and uses of cash for periods indicated (in thousands): Six Months Ended June 30, 2023 2022 (Unaudited) Cash (used in) provided by: Operating activities $ (164,083) $ (166,182) Investing activities (17,088) 47,359 Financing activities 120,300 (313) Effect of exchange rate changes on cash, cash equivalents, and restricted cash (264) 80 Net change in cash, cash equivalents, and restricted cash $ (61,135) $ (119,056) Operating Activities 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. 59 Table of Contents Investing Activities 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. 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. 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. We expect to accelerate our capital spending as we scale our GMP manufacturing capabilities, which will require significant capital for the foreseeable future. Financing Activities 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 From inception through the date of this Quarterly Report on Form 10-Q, we have generated minimal revenue, we have no clinical products approved for commercial sale and we have not generated any revenue from therapeutic and vaccine product candidates that are under development. We do not expect to generate significant revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if, this will occur. In addition, we expect our operating expenses to significantly increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our product candidates. We have also incurred and expect that we will continue to incur in the future additional costs associated with operating as a public company as well as costs related to future fundraising efforts. In addition, subject to obtaining regulatory approval of our product candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need substantial additional funding in connection with our continuing operations. We expect that our operating expenses will increase substantially if and as we: • continue research and development, including preclinical and clinical development of our existing product candidates; • potentially seek regulatory approval for our product candidates; • seek to discover and develop additional product candidates; • establish a commercialization infrastructure and scale up our manufacturing and distribution capabilities to commercialize any of our product candidates for which we may obtain regulatory approval; • seek to comply with regulatory standards and laws; 60 Table of Contents • maintain, leverage and expand our intellectual property portfolio; • hire clinical, manufacturing, scientific and other personnel to support our product candidates’ development and future commercialization efforts; • add operational, financial and management information systems and personnel; and • incur additional legal, accounting and other expenses in operating as a public company. 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 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. 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 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. Changing circumstances may cause us to increase our spending significantly faster than we currently anticipate and we may need to raise additional funds sooner than we presently anticipate. Moreover, research and development and our operating costs and fixed expenses such as rent and other contractual commitments, including those for our research collaborations, are substantial and are expected to increase in the future. Our future funding requirements will depend on many factors, including, but not limited to: • progress, timing, number, scope and costs of researching and developing our product candidates and our ongoing, planned and potential clinical trials; • time and cost of regulatory approvals; • our ability to successfully commercialize any product candidates, if approved and the costs of such commercialization activities; • revenue from product candidates that we may commercialize, if any, including the selling prices for such potential products and the availability of adequate third-party coverage and reimbursement for patients; • cost of building, staffing and validating our own manufacturing facilities in the U.S., including having a product candidate successfully manufactured consistent with FDA and European Medicines Agency (EMA) regulations; • terms, timing and costs of our current and any potential future collaborations, business or product acquisitions, CVRs, milestones, royalties, licensing or other arrangements that we have established or may establish; • time and cost necessary to respond to technological, regulatory, political and market developments; and • costs of filing, prosecuting, maintaining, defending and enforcing any patent claims and other intellectual property rights. 61 Table of Contents Unless and until we can generate a sufficient amount of revenues, we may finance future cash needs through public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances and marketing or distribution arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms, or at all, including but not limited to the offering, issuance and sale by us of our common stock that may be issued and sold under the ATM. 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. 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. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates, or grant licenses on terms unfavorable to us. We have no committed source of additional capital and if we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs or our commercialization efforts. Our current license and collaboration agreements may also be terminated if we are unable to meet the payment obligations under those agreements. As a result, we may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. Contractual Obligations We have material cash requirements to pay related-party affiliates and third parties under various contractual obligations discussed below: • We are obligated to make payments to several related-party affiliates under written agreements and other informal arrangements. We are also obligated to pay interest and to repay principal under our related-party notes. For information regarding our financing obligations, see Note 9 , Related-Party Debt, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q. • We are obligated to make payments under our operating leases, which primarily consist of facility leases. For information regarding our lease obligations, see Note 8 , Lease Arrangements, 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. • In connection with the acquisitions of Altor and VivaBioCell, we are obligated to pay contingent consideration upon the achievement of certain milestones. For information regarding our contingent consideration obligations, see Note 7 , Commitments and Contingencies—Contingent Consideration Related to Business Combinations, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q. • We have contractual obligations to make payments to related-party affiliates and third parties under unconditional purchase arrangements. For information on these unconditional purchase obligations, see Note 7, Commitments and Contingencies—Unconditional Purchase Obligations, of the “Notes to Consolidated Financial Statements” that appears in Part II, Item 8. “Financial Statements and Supplementary Data” of our Annual Report on Form 10-K filed with the SEC on March 1, 2023. 62 Table of Contents • 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 $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 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—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. Critical Accounting Policies and Estimates In Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K filed with the SEC on March 1, 2023, we disclose those accounting policies that we consider to be significant in determining our results of operations and financial condition. There have been no material changes to those policies that we consider to be significant as of the date of this Quarterly Report on Form 10-Q. Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP . The preparation of our condensed consolidated financial statements requires us to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. On an ongoing basis, we evaluate our estimates, including those related to the valuation of equity-based awards, deferred income taxes and related valuation allowances, preclinical and clinical trial accruals, impairment assessments, contingent value right measurement and assessments, the measurement of right-of-use assets and lease liabilities, useful lives of long-lived assets, loss contingencies, fair value calculation of warrants and convertible promissory notes, fair value measurements, asset acquisition, and the assessment of our ability to fund our operations for at least the next 12 months from the date of issuance of these condensed consolidated financial statements. We base our estimates on historical experience and on various other market-specific and relevant assumptions that we believe to be reasonable under the circumstances. Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the ongoing coronavirus pandemic could have on our significant accounting estimates. Actual results could differ from those estimates. Recent Accounting Pronouncements Refer to Note 2 , Summary of Significant Accounting Policies , 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 a discussion of recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance, to us. 63 Table of Contents Subsequent Events 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. 64 Table of Contents