Item 3. Legal Proceedings
ITEM 3. LEGAL PROCEEDINGS.
From time to time, we may be involved in various claims and legal proceedings relating to claims arising out of our operations. We are not currently a party to any legal proceedings that, in the opinion of our management, are likely to have a material adverse effect on our business. If we are served with any such complaints, we will assess at that time any contingencies for which we may need to reserve. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources, and other factors.
Shenzhen Beike Biotechnology Co. Ltd. Arbitration
In 2020, we received a Request for Arbitration before the International Chamber of Commerce, International Court of Arbitration. The arbitration relates to a license, development, and commercialization agreement that Altor entered into with Beike in 2014, which agreement was amended and restated in 2017, pursuant to which Altor granted to Beike an exclusive license to use, research, develop and commercialize products based on ANKTIVA in China for human therapeutic uses. In the arbitration, Beike is asserting a claim for breach of contract under the license agreement. Among other things, Beike alleges that we failed to use commercially reasonable efforts to deliver to Beike materials and data related to ANKTIVA. Beike is seeking specific performance and declaratory relief for the alleged breaches. On September 25, 2020, the parties entered into a standstill and tolling agreement (standstill agreement) under which, among other things, the parties affirmed they will perform certain of their obligations under the license agreement by specified dates and agreed that all deadlines in the arbitration are indefinitely extended. The standstill agreement could be terminated by any party on ten calendar days’ notice, and upon termination, the parties had the right to pursue claims arising from the license agreement in any appropriate tribunal. On March 20, 2023, we terminated the standstill agreement, and on April 11, 2023, Beike served an amended Request for Arbitration. We served an Answer and Counterclaims on May 19, 2023. Beike served a Reply to our counterclaims on June 21, 2023. Beike served its Statement of Claim on March 22, 2024, and the company served its Statement of Defense and Counterclaim on June 21, 2024, and Beike served its Statement of Defense to the Counterclaim on August 2, 2024. After the parties completed discovery, Beike served its Reply and Defense to Counterclaim on January 17, 2025. The hearing in the arbitration is scheduled to begin on June 9, 2025. Given that the proceeding is in the pre-hearing stages, it remains too early to evaluate the likely outcome of the case or to estimate any range of potential loss. We believe the claims asserted against the company lack merit and intend to defend the case, and to pursue our counterclaims, vigorously.
Securities Class Action
On June 30, 2023, a putative securities class action complaint, captioned Salzman v. ImmunityBio, Inc. et al. , No. 3:23-cv-01216-GCP-VET, was filed in the United States 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 then product candidate, ANKTIVA with BCG for the treatment of adult patients with BCG-unresponsive NMIBC with CIS with or without papillary tumors, 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 CMOs and the prospects for regulatory approval of the BLA. The complaint did not specify the amount of damages being sought. On September 27, 2023, the court appointed a lead plaintiff, approved their selection of lead counsel, and re-captioned the case In re ImmunityBio, Inc. Securities Litigation, No. 3:23-cv-01216. On November 17, 2023, the lead plaintiff filed an amended complaint, which named the same defendants and asserted the same claims as the previous complaint. On January 8, 2024, the defendants filed a motion to dismiss the amended complaint. On June 20, 2024, the court issued an order granting in part and denying in part the motion to dismiss. On July 16, 2024, the lead plaintiff notified the court that he would proceed with his current pleading, and the defendants answered the complaint on August 29, 2024. On January 25, 2025, following a mediation and the parties’ agreement in principle to settle the securities class action for $10.5 million, the lead plaintiff filed an unopposed motion for preliminary approval of class action settlement. The settlement is subject to preliminary and final approval by the U.S. District Court for the Southern District of California. A preliminary approval hearing is scheduled for March 7, 2025.
As a result of the foregoing, the company recorded legal settlement expense of $10.5 million in selling, general and administrative expense, on the consolidated statement of operations during the year ended December 31, 2024 and a corresponding amount in accrued expenses and other liabilities , on the consolidated balance sheet. The company believes that approximately $6.0 million of this amount will be paid by the company’s insurers, which will be recorded upon receipt.
126
Table of Conten t s
To the extent the court does not grant final approval of the settlement described above, the company is unable to estimate a range of loss, if any, that could result were there to be an adverse final decision in this action. In this event and if an unfavorable outcome were to occur, it is possible that the impact could be material to the company’s results of operations in the period(s) in which any such outcome becomes probable and estimable.
Altor BioScience, LLC, and NantCell, Inc. Matters Against Dr. Hing Wong and HCW Biologics, Inc.
On December 23, 2022, Altor and NantCell filed an arbitration demand against Dr. Hing Wong, former CEO of Altor and NantCell. The demand asserts claims for breach of Dr. Wong’s contracts with the companies, breach of the covenant of good faith and fair dealing, conversion, fraudulent concealment, unjust enrichment, breach of fiduciary duty, and replevin. The same day, Dr. Wong filed an arbitration demand seeking a declaratory judgment finding that Dr. Wong is not liable to Altor or NantCell for any of their claims. The parties agreed to consolidate the arbitration filings in one proceeding, and on January 23, 2023, Dr. Wong filed an Answering Statement denying the claims.
Also, on December 23, 2022 Altor and NantCell filed a complaint in the United States District Court for the Southern District of Florida against HCW, Dr. Wong’s new company. Altor’s and NantCell’s complaint asserts claims for misappropriation of trade secrets under both Florida and federal law, inducement of breach of contract, tortious interference with contractual relations, inducement of breach of fiduciary duty, conversion, unjust enrichment, replevin, request for assignment of patents and patent applications, and establishment of a constructive trust. On January 31, 2023, HCW filed motions to compel arbitration of Altor’s and NantCell’s claims, or in the alternative to stay or dismiss them. Altor and NantCell filed an opposition to the motions on February 14, 2023, and HCW filed reply papers on February 21, 2023. At a hearing on April 18, 2023, the court heard argument and requested supplemental briefing. After the hearing, the parties reached an agreement to consolidate all claims in a single arbitration proceeding. On May 1, 2023, we filed our arbitration demand asserting the same claims against HCW that were asserted in the federal court complaint. On May 15, 2023, HCW filed an Answering Statement denying the claims. The hearing in the consolidated arbitration took place from May 20, 2024 to May 30, 2024.
On July 13, 2024, we entered into a Settlement with HCW and Dr. Hing Wong to resolve the claims asserted in the consolidated arbitration and related matters. Under the terms of the Settlement, in part and for no monetary consideration from ImmunityBio, HCW transferred and assigned to ImmunityBio molecules (along with other related assets, including master cell banks, clinical trial protocols, inventory and FDA documents), controlled by HCW that were generated through the use of a TF Platform related to the human TGF-β receptor and TGF-β traps, including, without limitation, HCW9218, HCW9219, HCW9209 and any derivatives thereof or therefrom, including assignment of all patents, know-how and all other intellectual property existing as of the Settlement effective date and thereafter that is necessary or reasonably useful for the exploitation of such TGF-β molecules, with the exception that future reasonably useful intellectual property is the subject of a non-exclusive license to ImmunityBio. For indications outside of oncology, ImmunityBio has agreed to grant an exclusive license back to HCW for the transferred intellectual property for TGF-β products, and a non-exclusive license for neoadjuvant ovarian cancer, subject to certain requirements.
In addition, the Settlement provides to ImmunityBio a worldwide, perpetual, irrevocable, fully paid-up, royalty-free, exclusive license to exploit fusion proteins, molecules and/or antibodies created utilizing the TF Platform directed to the receptors of PDL-1, IL-7, IL-12, IL-15, IL-18, and IL-21 in the oncology field. Furthermore, the Settlement provides additional license terms including, without limitation, a non-exclusive license to ImmunityBio to exploit HCW9201, another fusion protein, and the anti-tissue factor based antibody HCW9101 and the linked resins to manufacture and purify the fusion proteins described above, as well as a right of first refusal for ImmunityBio with respect to any other fusion protein developed by HCW using the TF Platform going forward.
Pursuant to the Settlement, the parties agreed to mutual, full and complete releases. On December 23 and 24, 2024, the company dismissed the consolidated arbitration claims and a related action in the Delaware Court of Chancery in light of the Settlement.
127
Table of Conten t s
Van Luven, Barbieri and Shin Derivative Actions
On October 29, 2024, a shareholder derivative action was filed in the United States District Court for the Southern District of California against the members of our Board of Directors and certain officers, captioned Van Luven v. Soon-Shiong et al. , Case No. 3:24-cv-02014-GPCL-VET. The plaintiff purports to bring the action derivatively on behalf of ImmunityBio, and ImmunityBio is a nominal defendant to the action. Stemming from the company’s May 11, 2023 disclosure that it had received an FDA CRL stating, among other things, that it could not approve the company’s BLA for its then product candidate, ANKTIVA with BCG for the treatment of adult patients with BCG-unresponsive NMIBC with CIS with or without papillary tumors, in its present form due to deficiencies related to its pre-license inspection of the company’s third-party CMOs, the derivative complaint alleges that the individual defendants authorized or permitted materially false and misleading statements and/or omitted material adverse facts regarding ImmunityBio’s third-party CMOs and the prospects for regulatory approval of the ANKTIVA BLA. The derivative complaint asserts claims for violations of Section 14(a) of the Exchange Act as well as claims for breach of fiduciary duty, unjust enrichment, and waste of corporate assets. The derivative complaint seeks unspecified damages on behalf of the company, disgorgement or restitution, declaratory relief, and an award of costs and expenses to the derivative plaintiff, including attorneys’ fees. The court has entered an order extending the defendants’ deadline to respond to the complaint to April 18, 2025.
On February 25, 2025, a second shareholder derivative action was filed in the United States District Court for the Southern District of California against certain members of our Board of Directors and certain officers, captioned Barbieri v. Soon-Shiong, et al ., Case No. 3:25-cv-00416-AGS-JLB. The plaintiff purports to bring the action derivatively on behalf of ImmunityBio, and ImmunityBio is a nominal defendant in the action. This lawsuit asserts substantially similar claims and allegations as Van Luven .
On February 26, 2025, a third shareholder derivative action was filed in the United States District Court for the Southern District of California against certain current and former members of our Board of Directors and certain officers, captioned Shin v. Soon-Shiong, et al. , Case No. 3:25-cv-00423-JAH-DDL. The plaintiff purports to bring the action derivatively on behalf of ImmunityBio, and ImmunityBio is a nominal defendant in the action. This lawsuit asserts substantially similar claims and allegations as Van Luven .
Carlson Derivative Action
On November 20, 2024, a shareholder derivative action was filed in the Delaware Court of Chancery against the company’s Founder, Executive Chairman, Global Chief Scientific and Medical Officer and principal stockholder, Dr. Soon-Shiong, certain affiliates of Dr. Soon-Shiong, certain other members of management, and members of the company’s Board of Directors who serve on the Board of Directors’ Related Party Transaction Committee, captioned Carlson v. Soon-Shiong, et al., Case No. 2024-1195-VCL. The plaintiff purports to bring the action derivatively on behalf of ImmunityBio, and ImmunityBio is a nominal defendant to the action. The plaintiff alleges that the previously disclosed September 2023 financing transactions between the company and Dr. Soon-Shiong and his affiliates were not fair to the company. In particular, the plaintiff alleges that the transactions were timed to benefit Dr. Soon-Shiong and his affiliates during a temporary decline in the company’s stock price, resulting in an artificially low conversion price for certain convertible promissory notes that were among the transactions, when defendants knew the company’s stock price would increase following the company’s imminent resubmission of a BLA for, and the subsequent FDA approval of, ANKTIVA with BCG for the treatment of adult patients with BCG-unresponsive NMIBC with CIS with or without papillary tumors. The complaint alleges that defendants breached their fiduciary duties by entering into these transactions at that time and on those terms, thereby unjustly enriching Dr. Soon-Shiong and his affiliates. The derivative complaint seeks unspecified damages on behalf of the company, corporate governance changes with respect to related-party transactions, and an award of costs and expenses to the derivative plaintiff, including attorneys’ fees. On February 17, 2025, the defendants filed a motion to dismiss the complaint.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
128
Table of Conten t s
PART II