Sorrento Therapeutics, Inc. (SRNE) is a clinical and commercial stage biopharmaceutical company developing a diverse portfolio of next-generation treatments across three major therapeutic areas: cancer, infectious disease, and pain management. Despite facing significant challenges, the company remains committed to its mission of transforming science into Saving Life Medicines™.

Business Overview

Sorrento Therapeutics is focused on advancing its proprietary fully human G-MAB™ antibody library and ACEA small molecule library to drive an innovative pipeline of new solutions for cancer. The company leverages its extensive immuno-oncology platforms, including immuno-cellular therapies (DAR-T™), antibody-drug conjugates (ADCs), oncolytic virus (Seprehvec™), and lymphatic drug delivery (Sofusa™), to enhance these molecular entities.

In the infectious disease space, Sorrento is at the forefront of the fight against COVID-19, applying its antibody and small molecule capabilities to develop highly sensitive and rapid diagnostics, as well as multi-modal treatments for the SARS-CoV-2 virus and its variants. The company's diagnostic platforms include the COVIMARK™ lateral flow antigen test and the VIREX™ platform, which leverages existing manufacturing infrastructure for glucometers and glucose strip tests to provide affordable and scalable solutions. Therapeutic solutions in development include a next-generation mRNA Omicron vaccine (STI-1557), a next-generation protease inhibitor antiviral pill (STI-1558), and a variant agnostic mesenchymal stromal cell therapy for "long" COVID.

Sorrento's pain management segment is led by its majority-owned subsidiary, Scilex Holding Company (Nasdaq: SCLX). Scilex Holding is focused on becoming the global pain management leader, with a commitment to social, environmental, economic, and ethical principles. The company's flagship product, ZTlido®, is a prescription lidocaine topical product that has demonstrated superior adhesion and bioavailability compared to current lidocaine patches. In 2022, Scilex Holding also entered into an exclusive agreement to market and distribute the FDA-approved Gloperba® in the U.S. for painful gout flares. Scilex Holding is developing a robust pipeline, including the injectable viscous gel formulation SEMDEXA™, which is nearing pivotal studies, and Resiniferatoxin (RTX), a non-opioid chronic pain treatment that is also advancing towards pivotal studies.

Financial Performance

Sorrento Therapeutics has faced significant financial challenges in recent years, as evidenced by its annual financial results. For the fiscal year ended December 31, 2022, the company reported annual net income of -$559,331,000, annual revenue of $62,839,000, annual operating cash flow of -$293,857,000, and annual free cash flow of -$307,514,000.

In the latest quarter, ended June 30, 2023, Sorrento Therapeutics reported total revenues of $15,025,000, a 31% increase compared to the same period in the prior year. This increase was driven by a 59% rise in product revenues from the company's Scilex segment, which offset a 31% decline in revenues from the Sorrento Therapeutics segment. The Scilex segment's revenue growth was primarily attributed to an 81% increase in gross product sales of ZTlido® and the launch of ELYXYB in April 2023, partially offset by an increase in rebates.

The company's research and development expenses decreased by 31% to $33,271,000 in the second quarter of 2023, compared to $48,467,000 in the same period of 2022. This reduction was due to a shift in focus away from earlier-stage COVID-19-related programs and towards late-stage clinical product candidate development. Selling, general, and administrative expenses remained relatively flat at $48,941,000 in the second quarter of 2023, compared to $48,136,000 in the prior-year period.

Sorrento Therapeutics reported a net loss of $108,536,000 in the second quarter of 2023, compared to a net loss of $219,477,000 in the same period of 2022.

Liquidity and Capital Resources

As of June 30, 2023, Sorrento Therapeutics had $69,749,000 in cash and cash equivalents, compared to $23,634,000 as of December 31, 2022. The increase in cash was primarily due to proceeds from the company's debtor-in-possession (DIP) financing, equity offerings, and other short-term debt, partially offset by cash used in operating activities.

In February 2023, Sorrento Therapeutics and its wholly owned subsidiary, Scintilla Pharmaceuticals, Inc., filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas. The company continues to operate its business in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

To ensure ordinary course operations during the Chapter 11 process, Sorrento Therapeutics obtained approval from the Bankruptcy Court for a $75 million DIP financing facility from JMB Capital Partners Lending, LLC. The company also recently received final approval for a $20 million DIP financing facility from its subsidiary, Scilex Holding, and a $100 million DIP financing facility from Oramed Pharmaceuticals Inc.

Risks and Challenges

Sorrento Therapeutics faces several risks and challenges as it navigates the Chapter 11 process. The outcome of the bankruptcy proceedings is dependent on factors outside the company's control, including actions of the Bankruptcy Court. There is a significant risk that the company's common stock may become worthless, as recoveries for holders of common stock, if any, will depend on the company's ability to confirm and consummate a plan of reorganization.

Additionally, the company's operations and ability to develop and execute its business plan, financial condition, liquidity, and continuation as a going concern are subject to a high degree of risk and uncertainty associated with the Chapter 11 process. The company may also face challenges in maintaining relationships with suppliers, service providers, customers, and employees, as well as in retaining key personnel during this period.

Sorrento Therapeutics has also identified a material weakness in its internal control over financial reporting, which could impact its ability to produce reliable financial reports and effectively manage the company. The company is taking steps to remediate this issue, but there is no guarantee that its efforts will be successful.

Outlook and Conclusion

Despite the significant challenges facing Sorrento Therapeutics, the company remains committed to its mission of developing innovative treatments for cancer, infectious disease, and pain management. The company's diverse pipeline, including late-stage product candidates like SEMDEXA™ and RTX, holds promise for the future.

However, the outcome of the Chapter 11 process remains highly uncertain, and the company's ability to emerge as a viable entity is subject to significant risk. Investors should carefully consider the risks and uncertainties associated with Sorrento Therapeutics before making any investment decisions.