Nine Months Ended September 30,

2017

2016

Operating activities:

Net loss

$
(71,936
)

$
(96,571
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

3,997

1,768

Stock-based compensation expense

28,113

62,586

Deferred income tax benefit

(315
)

(423
)
Non-cash interest items, net

648

(273
)
Loss on disposal of assets

64

18

Amortization of net premiums on marketable securities

1,298

1,567

Gain on sales of marketable securities

(25
)

(118
)
Changes in operating assets and liabilities:

Prepaid expenses and other current assets

(576
)

(1,380
)
Other assets

464

75

Accounts payable

1,493

321

Accrued expenses and other liabilities

(446
)

2,454

Due to related parties

759

501

Deferred rent and revenue

1,322

1,635

Net cash used in operating activities

(35,140
)

(27,840
)
Investing activities:

Purchases of property, plant and equipment

(23,382
)

(5,202
)
Purchase of cost method investment

(8,500
)

—

Purchases of marketable securities

(75,115
)

(207,891
)
Sales/maturities of marketable securities

186,815

107,885

Net cash provided by (used in) investing activities

79,818

(105,208
)
Financing activities:

Principal payments of financing/capital lease obligations

(19,868
)

(10
)
Proceeds from exercise of stock options and warrants

1,192

1,044

Repurchase of common stock with commissions

(12,456
)

(11,898
)
Net share settlement for RSU vesting and option exercises

(709
)

(592
)
Net cash used in financing activities

(31,841
)

(11,456
)
Net increase (decrease) in cash and cash equivalents

12,837

(144,504
)
Cash and cash equivalents, beginning of period

8,083

175,908

Cash and cash equivalents, end of period

$
20,920

$
31,404

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest

$
632

$
29

Income taxes

$
3

$
1

Supplemental disclosure of non-cash investing and financing activities:

Property and equipment purchases acquired under capital lease

$
19,448

$
—

Estimated fair value of building under build-to-suit lease

$
—

$
5,139

Property and equipment purchases included in accounts payable and accrued
expenses

$
17,561

$
1,092

Unrealized gain on marketable securities

$
108

$
506

Cashless exercise of stock options and warrants

$
16

$
456

Lease incentive

$
—

$
239


	Nine Months Ended September 30, 2021
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total ImmunityBio Stockholders’ Deficit		Noncontrolling Interests		Total Stockholders’ Deficit
	Shares	Amount

Balance as of December 31, 2020	382,243,142	$	38	$	1,495,163	$	(1,615,131)	$	122	$	(119,808)	$	1,318	$	(118,490)
Stock-based compensation expense	—	—		15,298		—		—		15,298		—		15,298
Exercise of stock options	690,465	—		1,121		—		—		1,121		—		1,121
Vesting of RSUs	235,725	—		—		—		—		—		—		—
Net share settlement for RSUs vesting	(102,011)	—		(2,624)		—		—		(2,624)		—		(2,624)
Other comprehensive (loss) income, net of tax	—	—		—		—		(160)		(160)		—		(160)
Net loss	—	—		—		(79,614)		—		(79,614)		(867)		(80,481)
Balance as of March 31, 2021	383,067,321	38		1,508,958		(1,694,745)		(38)		(185,787)		451		(185,336)
Issuance of common stock under “at-the-market” offering, net of commissions and offering costs of $3,077	6,420,441	1		94,886		—		—		94,887		—		94,887
Stock-based compensation expense	—	—		17,863		—		—		17,863		—		17,863
Exercise of stock options	759,639	—		3,311		—		—		3,311		—		3,311
Vesting of RSUs	100,359	—		—		—		—		—		—		—
Net share settlement for RSUs vesting	(20)	—		—		—		—		—		—		—
Other comprehensive (loss) income, net	—	—		—		—		75		75		—		75
Net loss	—	—		—		(88,288)		—		(88,288)		(1,097)		(89,385)
Balance as of June 30, 2021	390,347,740	39		1,625,018		(1,783,033)		37		(157,939)		(646)		(158,585)
Issuance of common stock under “at-the-market” offering, net of commissions and offering costs of $962	3,796,537	—		42,061		—		—		42,061		—		42,061
Stock-based compensation expense	—	—		13,840		—		—		13,840		—		13,840
Exercise of stock options	176,196	—		678		—		—		678		—		678
Vesting of RSUs	285,280	—		—		—		—		—		—		—
Net share settlement for RSUs vesting	(96,058)	—		(960)		—		—		(960)		—		(960)
Sale of assets to an entity under common control	—	—		1,435		—		—		1,435		—		1,435
Other comprehensive (loss) income, net of tax	—	—		—		—		16		16		—		16
Net loss	—	—		—		(87,629)		—		(87,629)		(800)		(88,429)
Balance as of September 30, 2021	394,509,695	$	39	$	1,682,072	$	(1,870,662)	$	53	$	(188,498)	$	(1,446)	$	(189,944)

~~Amortization expense was $0.6 million and $0.4 million for the three months ended~~

~~As of September 30, 2017 and December 31, 2016, accrued expenses consisted of (in thousands):~~

~~As of September 30, 2017 and December 31, 2016, other current liabilities were made up of (in thousands):~~

~~Net investment income includes interest income from all bank accounts as well as marketable securities, net realized~~Realized gains orand losses on sales of ~~investments and the amortization of the premiums and discounts of the investments and is as follows~~available-for-sale marketable debt securities were not material for the three and nine months ended September 30, ~~2017~~2022 and ~~2016 (in thousands):~~

Fair value is defined as an exit price that would be received from the sale of ~~September 30, 2017.~~

~~5. Cash Equivalents and Marketable Securities~~

~~As of September 30, 2017, all of~~an asset or paid to transfer a liability in the ~~Company’s marketable securities are classified as available-for-sale and are scheduled to mature within 4.8 years. At September 30, 2017,~~principal or most advantageous market for the ~~detail of the Company’s cash equivalents and marketable securities is as follows (in thousands):~~

September 30, 2017

(unaudited)

Amortized Cost

Unrealized Gains

Unrealized Losses

Fair Value

Current:

Commercial paper

$
5,145

$
1

$
—

$
5,146

Corporate debt securities

93,609

19

(58
)

93,570

Government sponsored securities

24,263

—

(28
)

24,235

Foreign government bonds

8,402

—

(6
)

8,396

Current portion

131,419

20

(92
)

131,347

Noncurrent:

Corporate debt securities

31,540

25

(109
)

31,456

Government sponsored securities

2,761

—

(19
)

2,742

Noncurrent portion

34,301

25

(128
)

34,198

Total

$
165,720

$
45

$
(220
)

$
165,545

~~At December 31, 2016, the detail of the Company’s cash equivalents and marketable securities is as follows (in thousands):~~

December 31, 2016

Amortized Cost

Unrealized Gains

Unrealized Losses

Fair Value

Current:

Corporate debt securities

$
165,605

$
40

$
(76
)

$
165,569

Government sponsored securities

22,252

21

(1
)

22,272

Foreign government bonds

5,004

—

(2
)

5,002

Current portion

192,861

61

(79
)

192,843

Noncurrent:

Corporate debt securities

69,414

71

(290
)

69,195

Government sponsored securities

17,018

2

(38
)

16,982

Foreign government bonds

1,405

—

(11
)

1,394

Noncurrent portion

87,837

73

(339
)

87,571

Total

$
280,698

$
134

$
(418
)

$
280,414

~~Included in corporate debt securities is $2.0 million of cash equivalents at December 31, 2016.~~

~~Available-for-sale investments that had been~~asset or liability in an ~~unrealized loss position for more~~orderly transaction between market participants on the measurement date. We use a three-tier fair value hierarchy to classify and ~~less than 12 months at September 30, 2017 and December 31, 2016 are as follows (in thousands):~~

September 30, 2017

(unaudited)

Less than 12 months

More than 12 months

Estimated Fair
Value

Gross Unrealized
Losses

Estimated Fair
Value

Gross Unrealized
Losses

Corporate debt securities

$
76,280

$
(130
)

$
10,892

$
(36
)
Government sponsored securities

26,978

(47
)

—

—

Foreign government bonds

7,000

(1
)

1,397

(6
)
Total

$
110,258

$
(178
)

$
12,289

$
(42
)

December 31, 2016

Less than 12 months

More than 12 months

Estimated Fair
Value

Gross Unrealized
Losses

Estimated Fair
Value

Gross Unrealized
Losses

Corporate debt securities

$
17,204

$
(39
)

$
—

$
—

Government sponsored securities

150,320

(366
)

—

—

Foreign government bonds

6,396

(13
)

—

—

Total

$
173,920

$
(418
)

$
—

$
—

The Company evaluated its securities for other-than-temporary impairment and concluded that the decline in value was primarily caused by current economic and market conditions. The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases. Therefore, the Company did not have any other-than-temporary impairment loss during the nine months ended September 30, 2017. At September 30, 2017, 57 of the securities and bonds are in an unrealized loss position.

~~The Company recorded realized gains and losses on sales or maturities of available-for-sale securities as follows (in thousands):~~

Three Months Ended September 30,

Nine Months Ended September 30,

(unaudited)

(unaudited)

2017

2016

2017

2016

Gross realized gains

$
43

$
51

$
45

$
143

Gross realized losses

(9
)

(2
)

(15
)

(76
)

Net realized gains

$
34

$
49

$
30

$
67

~~6. Fair Value Measurements~~

~~Recurring Valuations~~

~~In accordance with the authoritative guidance for financial~~disclose all assets and liabilities measured at fair value on a recurring basis, ~~(ASC Topic 820), the Company prioritizes the inputs used to measure~~as well as assets and liabilities measured at fair value ~~from market-based assumptions~~on a non-recurring basis, in periods subsequent to ~~entity specific assumptions~~their initial measurement. The hierarchy requires us to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

*This amount excludes $6.1 million in depository institutions that are classified as Level 1 assets.

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.

Because all of our product candidates are in the early stages of preclinical and clinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of any of our product candidates or whether, or when, we may achieve profitability. Until such time, if ever, asuntil we can generate ~~substantial product~~a sufficient amount of revenues, we ~~expect to~~may finance ~~our~~future cash needs through ~~a combination of~~public or private equity offerings, license agreements, debt financings, collaborations, strategic alliances ~~and/~~and marketing or ~~licensing~~distribution arrangements. ~~We do~~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 ~~have any committed external source~~limited to the offering, issuance and sale by us of ~~funds.~~ up to a maximum aggregate amount of $500.0 million of our common stock that may be issued and sold under the ATM. As of September 30, 2022, we had $330.8 million available for future stock issuances under the ATM. See Note 11, Stockholders’ Deficit, of the “Notes to Unaudited Condensed Consolidated Financial Statements” that appears in Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q.

~~Even~~operations may not be profitable even if one or more of our product candidates ~~is eventually approved for commercial sale,~~under development are successfully developed and produced and thereafter commercialized. Even if we ~~anticipate incurring significant costs associated with commercializing any approved product candidate and~~do become profitable, we may not ~~generate~~be able to sustain or increase our profitability on a quarterly or annual basis. As a result, it may be more difficult for you to assess our future viability than it could be if we had a longer operating history.

A failure of Sorrento to successfully develop our product candidates that are covered by the collaboration, or commercialize such product candidates, or the termination of our agreement with Sorrento may have a material adverse effect on our business, results of operations and financial condition. As of the date hereof, the parties have not yet agreed upon any projects under the joint development and license agreement; therefore Sorrento has no rights to use our NK cellsCMOs, or other ~~technologies or intellectual property rights or to begin related research, development or commercialization activities and~~third parties we are free to pursue, and are actively pursuing, research, development and commercialization activities with CD33, HER2, CD123, GD2 and CSPG4 CAR targeted taNK products and with antibodies that bind to a wide range of targets, including PDL-1.

~~We are heavily dependent~~rely on, ~~our senior management, particularly Drs. Patrick Soon-Shiong and Barry Simon, and a loss of a member of our senior management team in the future could harm our business.~~

If we lose members of our senior management, we may not be able to find appropriate replacements on a timely basis, and our business could be adversely affected. Our existing operations and continued future development depend to a significant extent upon the performance and active participation of certain key individuals, including Drs. Patrick Soon-Shiong, our Chairman and CEO and our principal stockholder, and Barry Simon, our President and Chief Administrative Officer. Although Dr. Soon-Shiong will primarily focus on NantKwest matters and is highly active in our management, he does devote a certain amount of his time to a number of different endeavors and companies, including NantWorks, a collection of multiple companies in the healthcare and technology space, which he founded in 2011. Additionally, we are dependent on commercial relationships with various other parties affiliated with NantWorks and with Dr. Soon-Shiong, and we may enter into additional relationships in the future, including with respect to using an adenoviral vector developed by an affiliate entity, and if Dr. Soon-Shiong was to cease his affiliation with us or with NantWorks, these entities may be unwilling to continue these relationships with us on commercially reasonable terms, or at all. The risks related to our dependence upon Dr. Soon-Shiong are particularly acute given his ownership percentage, relationships, role in our company and reputation. If we were to lose Drs. Soon-Shiong or Simon, we may not be able to find appropriate replacements on a timely basis and our financial condition and results of operations could be materially adversely affected.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided stock options and warrants that vest over time. Additionally, we provided warrants that vest upon the achievement of certain performance milestones to Dr. Soon-Shiong. The value to employees of stock options and warrants that vest over time may be significantly affected by movements in our stock price that are beyond our control, and may at any time be insufficient to counteract more lucrative offers from other companies. Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us on short notice. We face significant competition for employees, particularly scientific personnel, from other biopharmaceutical companies, which include both publicly-traded and privately-held companies, and we may not be able to hire new employees quickly enough to meet our needs. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. Except with respect to Dr. Simon, we do not maintain “key man” insurance policies on the lives of these individuals or the lives of any of our other employees.

~~Dr. Soon-Shiong, our Chairman and CEO and our principal stockholder, has significant interests in other companies which may conflict with our interests.~~

Our Chairman and CEO, Dr. Soon-Shiong, is the founder of NantWorks. The various NantWorks companies are currently exploring opportunities in the immunotherapy, infectious disease and inflammatory disease fields. In particular, we have agreements with NantOmics, LLC (“NantOmics”), NanoCav, LLC (“NanoCav”), NantCell, Inc. (“NantCell”), NantBio, Inc. (“NantBio”), VivaBioCell S.p.A. (“VivaBioCell”), and Altor BioScience Corporation (“Altor”) to provide services, technology and equipment for use in our efforts to develop our product pipeline. Dr. Soon-Shiong holds a controlling interest in these entities. As a result, they or other companies affiliated with Dr. Soon-Shiong may compete with us for business opportunities or, in the future, develop products that are competitive with ours (including products in the other therapeutic fields in which we may target in the future). As a result Dr. Soon-Shiong’s interests may not be aligned with our other stockholders and he may from time to time be incentivized to take certain actions that benefit his other interests and that our other stockholders do not view as being in their interest as investors in our company. Moreover, even if they do not directly relate to us, actions taken by Dr. Soon-Shiong and the companies with which he is involved could impact us. Given we changed our corporate name to NantKwest during 2015, this is particularly true of the various NantWorks companies.

~~We will need to grow the size and capabilities of our organization, and we may experience difficulties in managing this growth.~~

To effect our business plan, we will need to rapidly add other management, accounting, regulatory, manufacturing and scientific staff. As of September 30, 2017, we had 118 employees. We will need to attract, retain and motivate a significant number of new additional managerial, operational, sales, marketing, financial, and other personnel, as well as highly skilled scientific and medical personnel, and to expand our capabilities to successfully pursue our research, development, manufacturing and commercialization efforts and secure collaborations to market and distribute our products. This growth may strain our existing managerial, operational, financial and other resources. We also intend to add personnel in our research and development and manufacturing departments as we expand our clinical trial and research capabilities. Moreover, we will need to hire additional accounting and other personnel and augment our infrastructure as we transition to operating as a public company. Any inability to attract and retain qualified employees to enable our planned growth and establish additional capabilities or our failure to manage our growth effectively could delay or curtail our product development and commercialization efforts and harm our business.

~~We have limited manufacturing experience and may not be able to manufacture aNK, haNK, or taNK cells on a large scale or in a cost-effective manner.~~

aNK cells have been grown in various quantities in closed-bag cell culture systems and smaller quantities in bioreactors. We or our third-party contractors will need to develop the ability to grow aNK, haNK and taNK cells on a large scale basis in a cost efficient manner. We have not demonstrated the ability to manufacture aNK cells beyond quantities sufficient for research and development and limited clinical activities. We have no experience manufacturing aNK cells specifically at the capacity that will be necessary to support large clinical trials or commercial sales, and have limited experience producing haNK and taNK cells, which may involve a more complex process (es) than manufacturing aNK cells. The novel nature of our technology also increases the complexity and risk in the manufacturing process. We are in the process of establishing a site for the manufacture of aNK, haNK and taNK cells for our planned clinical trials and, if we receive FDA approval, initial commercialization. However, we may encounter difficulties in ~~obtaining~~achieving the ~~approvals for,~~volume of production needed to satisfy commercial demand, may experience technical issues that impact quality or compliance with applicable and ~~designing, constructing, validating~~strictly enforced regulations governing the manufacture of pharmaceutical products, and ~~operating, any new manufacturing facility. We~~ may ~~also be~~experience shortages of qualified personnel to adequately staff production operations;

Table of ~~risks associated with marketing our product candidates internationally could materially adversely affect our business.~~

We plan to seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:

~~differing regulatory requirements in foreign countries;~~

Contents

~~unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;~~

~~economic weakness, including inflation, or political instability in particular foreign economies and markets;~~

~~compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;~~

~~foreign taxes, including withholding of payroll taxes;~~

~~foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;~~

•

~~difficulties staffing and managing foreign operations;~~

~~workforce uncertainty in countries where labor unrest is more common than in the United States;~~

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

~~potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;~~

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

~~production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and~~

~~business interruptions resulting from geo-political actions, including war and terrorism.~~

~~These and other risks associated with international operations may materially adversely affect our ability to attain or maintain profitable operations.~~

We have formed, and may in the future form or seek, strategic alliances or enter into collaborations with third parties or additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.

If we fail to enter into such strategic alliances, collaborations or licensing arrangements, or such strategic alliances, collaborations or licensing arrangements are not successful, we may not be able to capitalize on the market potential of our product candidates.

We have formed, and may in the future form or seek, strategic alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third and related parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. ~~For example, we entered into an agreement whereby Viracta granted~~We plan to ~~us exclusive world-wide rights~~collaborate with governmental, academic and corporate partners, including affiliates, to ~~Viracta’s Phase II drug candidate, VRx-3996,~~improve and develop N-803, saRNA, hAd5 and yeast technologies, and other therapies for new indications for use in combination with other therapies and to improve and develop other product candidates, which may expose us to additional risks, or we may not realize the benefits of such collaborations.

Because some of our ~~platform of natural killer cell therapies. However, if Viracta fails~~collaborations are conducted at outside laboratories, and we do not have complete control over how the studies are conducted or reported or over the manufacturing methods used to ~~raise sufficient capital to complete their pivotal Phase II trial, if their trial is unsuccessful, or if~~manufacture our ~~future clinical trial of NK cell therapy~~product candidate, Anktiva in combination with ~~VRx-3996 fails,~~BCG for the ~~value~~treatment of patients with BCG-unresponsive NMIBC with CIS with or without Ta or T1 disease, the results of such studies, which we may use as the basis for our conclusions, projections or decisions with respect to our current or future product candidates, may be incorrect or unreliable, or may have a negative impact on us if the results of such studies are imputed to our product candidates or proposed indications, even if such imputation is improper. Additionally, we may use third‑party data to analyze, reach conclusions or make predictions or decisions with respect to our product candidates that may be incomplete, inaccurate or otherwise unreliable.

Further, collaborations involving our product candidates will be subject to numerous risks, which may include the following:

•collaborators, including their related or affiliated companies, may be entitled to receive exclusive rights for or involving our products;

•collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;

•collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization of our product candidates based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

•collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

•collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates;

•a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing and distribution;

•collaborators may not properly maintain, defend or enforce our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

•disputes may arise between us and a collaborator that cause the delay or termination of the ~~Viracta~~research, development or commercialization of our product candidates, or that result in costly litigation or arbitration that diverts management attention and resources;

•collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates;

Table of Contents

•if an agreement with any collaborator terminates, our access to technology and intellectual property licensed to us by that collaborator may be restricted or terminate entirely, which may delay our continued development of our product candidates using the collaborator’s technology or intellectual property or require us to stop development of those product candidates completely; and

•collaborators may own or co-own intellectual property covering our product candidates or technology that results from our collaborating with them, and in such cases, we may not have the exclusive right to commercialize such intellectual property.

As a result, if we enter into collaboration agreements and strategic partnerships or license our product candidates, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business. Additionally, exclusive rights that we may grant in connection with collaboration agreements may limit our ability to enter into new or additional collaboration agreements or strategic partnerships if we experience issues with existing collaborations. We also cannot be certain that, following a strategic transaction or license, we will achieve the revenues or specific net income that justifies such transaction. Any delays in entering into new collaborations or strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would ~~be materially adversely affected.~~

harm our business prospects, financial condition and results of operations.

Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy.

If ~~we license products~~conflicts arise between us and our collaborators or ~~businesses, we~~strategic partners, these parties may ~~not be able~~act in a manner adverse to ~~realize~~us and could limit our ability to implement our strategies.

If conflicts arise between our corporate or academic collaborators or strategic partners and us, the ~~benefit~~other party may act in a manner adverse to us and could limit our ability to implement our strategies. Some of ~~such transactions if we are unable to successfully integrate them with~~ our existing ~~operations~~academic collaborators and ~~company culture. We cannot be certain that, following a~~ strategic ~~transaction~~partners are conducting multiple product development efforts. Such current or ~~license, we will achieve~~future collaborators or strategic partners could become our competitors in the ~~revenue or specific net income that justifies such transaction. Any delays in~~future and could develop competing products, preclude us from entering into ~~new strategic partnership~~collaborations with their competitors, fail to obtain timely regulatory approvals, terminate their agreements ~~related~~with us prematurely or fail to ~~our product candidates could delay~~devote sufficient resources to the development and commercialization of our product candidates. Competing product candidates, either developed by the collaborators or strategic partners or to which the collaborators or strategic partners have rights, may result in the withdrawal of our collaborator’s or partner’s support for our product candidates.

For example, in 2019, Sorrento Therapeutics, Inc. with which we jointly established a new entity called Immunotherapy NANTibody, LLC as a stand-alone biotechnology company, commenced litigation against us and certain ~~geographies~~of our officers and directors, alleging that we improperly caused NANTibody to acquire IgDraSol, Inc. and in 2020, Sorrento sent letters purporting to terminate an exclusive license agreement with us and an exclusive license agreement with NANTibody. Additionally, in 2020, we received a Request for ~~certain indications, which would~~Arbitration before the International Chamber of Commerce, International Court of Arbitration, served by Shenzhen Beike Biotechnology Co. Ltd. asserting breach of contract under our subsidiary Altor’s license agreement with them. For more information regarding these disputes, see Note 7, Commitments and Contingencies—Litigation, of the “Notes to Condensed Consolidated Financial Statements” that appears in Part I, Item 1. “Financial Statements” of this Quarterly Report on Form 10-Q. Any of these developments could harm our ~~business prospects, financial condition~~product development efforts.

Table of Contents

Our use of joint ventures, strategic partnerships and ~~results of operations.~~

~~Our internal computer systems, or those used by our contractors or consultants,~~alliances may ~~fail or suffer security breaches.~~

~~Our business model involves the storage and transmission of clinical trial and other data on our systems and on the systems of our consultants and contractors, and security breaches~~ expose us to ~~a risk~~risks associated with jointly owned investments.

We may operate parts of ~~loss of this information, governmental fines and penalties, litigation~~our business through joint ventures, strategic partnerships and/or ~~potential liability,~~alliances with other companies. While such arrangements may, in some cases, give us access to technologies that we may not otherwise have or may give us access to capital, they involve risks not otherwise present in our own investments, including: (i) we may not control the venture, and it may divert management time and resources; (ii) the partner(s) may not agree to distributions that we believe are appropriate; (iii) we may experience impasses or disputes with such partner(s) on certain decisions, which could require us to expend additional resources to resolve such impasses or disputes, including litigation or arbitration; (iv) our partner(s) may become insolvent or bankrupt, fail to fund their share of required capital contributions or fail to fulfil their obligations as a venture partner; (v) the arrangements governing these relationships may contain certain conditions or milestone events that may never be satisfied or achieved; (vi) our partner(s) may have business or economic interests that are inconsistent with our interests and may take actions contrary to our interests; (vii) we may suffer losses as a result of actions taken by the partner(s); and (viii) it may be difficult for us to exit if an impasse arises or if we desire to sell our interest for any reason. In addition, ~~to negative publicity. Despite~~we may, in certain circumstances, be liable for the ~~implementation of security measures, our internal computer systems and those~~actions of our ~~contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. Our security measures and those~~partners. Any of ~~our contractors and consultants may also be breached due to employee error, malfeasance or otherwise. If such an event were to occur and cause interruptions in our operations, it~~the foregoing risks could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for research and development of our product candidates and to conduct clinical trials and may rely on third parties for the manufacture of our product candidates and similar events relating to their computer systems could also have a material adverse effect on our ~~business.~~

Tobusiness, financial condition and results of operations.

For example, we are in the ~~extent~~initial stages of establishing a joint venture relationship with Amyris, and there can be no guarantee that ~~any disruption or security breach were to result in~~it will be successful.

We will be heavily dependent on our senior management, particularly Dr. Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer, and a loss of a member of our senior management team in the future, even if only temporary, could harm our business.

Our operations will be dependent upon the services of our executives and our employees who are engaged in research and development. If we lose the services of members of our senior management, particularly Dr. Soon-Shiong, for a short or ~~damage~~an extended time, for any reason, we may not be able to find appropriate replacements on a timely basis, and our business, financial condition and results of operations could be materially adversely affected. Our existing operations and our future development depend to a significant extent upon the performance and active participation of certain key individuals, particularly Dr. Soon-Shiong, our Executive Chairman and Global Chief Scientific and Medical Officer. Although Dr. Soon-Shiong focuses heavily on our matters and is highly active in our management, he does devote a significant amount of his time to a number of different endeavors and companies, including NantHealth, Inc., NantMedia Holdings, LLC (which operates the Los Angeles Times and the San Diego Union-Tribune) and NantWorks, which is a collection of multiple companies in the healthcare and technology space. The risks related to our ~~data~~dependence upon Dr. Soon-Shiong are particularly acute given his ownership percentage, the commercial and other relationships that we have with entities affiliated with him, his role in our company and his public reputation. We may also be dependent on additional funding from Dr. Soon-Shiong and his affiliates, which may not be available when needed and which he is under no obligation to provide.

To induce valuable employees to remain at our company, in addition to salary and cash incentives, we have provided, and plan to continue providing, equity incentive awards that vest over time. The value to employees of equity incentive awards that vest over time may be significantly affected by movements in our stock price that are beyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us on short notice. We do not have employment agreements with our NEOs and do not maintain “key man” insurance policies on the lives of these individuals or ~~applications, or inappropriate disclosure~~the lives of ~~confidential or proprietary information,~~any of our other employees.

Table of Contents

We will need to grow the size and capabilities of our organization, and we ~~could incur liability~~may experience difficulties in managing this growth.

Our future financial performance and ~~the further development and commercialization of~~our ability to commercialize our product candidates ~~could be delayed.~~

~~Future acquisitions and investments could disrupt our business and harm our financial condition and operating results.~~

~~Our success may~~will depend, in part, on our ability to ~~expand~~effectively manage any future growth, and our ~~products~~management may also have to divert a disproportionate amount of their attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities. In order to develop our business in accordance with our business plan, we will have to hire additional qualified personnel, including in the areas of research, manufacturing, clinical trials management, regulatory affairs, and ~~services. In some circumstances, we may determine~~sales and marketing. We are continuing our efforts to ~~do so through~~recruit and hire the ~~acquisition~~necessary employees to support our planned operations in the near term. However, competition for qualified personnel in the biotechnology and pharmaceuticals industry is intense due to the limited number of ~~complementary businesses~~individuals who possess the skills and ~~technologies rather than through, or in conjunction with, internal development. The identification of suitable acquisition candidates~~experience required, and no assurance can be ~~difficult, time-consuming~~given that we will be able attract, hire, retain and ~~costly,~~motivate the highly skilled employees that we need, on acceptable terms or at all. Future growth will impose significant added responsibilities on members of management, including:

•identifying, recruiting, integrating, maintaining, and motivating additional employees;

•managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and

•improving our operational, financial and management controls, reporting systems, and procedures.

We currently rely, and for the foreseeable future we expect to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services. There can be no assurance that the services of these independent organizations, advisors and consultants will continue to be available to us on a timely basis when needed, or that we can find qualified replacements on economically reasonable terms, or at all. In addition, if we are unable to effectively manage our outsourced activities or if the quality, compliance or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed, or terminated, and we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business.

If we are not able to effectively expand our organization by hiring new employees and expanding our groups of consultants and contractors, we may not be able to successfully ~~complete identified acquisitions. The~~implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development, and commercialization goals on a timely basis, or at all.

If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, cause us to incur debt or assume contingent liabilities, and subject us to other risks.

We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property rights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks, ~~we face in connection~~including:

•assimilation of operations, intellectual property, and products of an acquired company or product, including difficulties associated with ~~acquisitions include:~~

integrating new personnel;

•the diversion of ~~management time~~our managements’ attention from our existing product programs and ~~focus from operating our business to addressing acquisition integration challenges;~~

initiatives in pursuing such a strategic merger or acquisition;

•retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;

•significant upfront milestone and/or royalty payments from which we may not realize the anticipated benefits;

•risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and regulatory approvals; and

•our inability to generate revenues from acquired ~~company;~~

~~coordination of research and development functions;~~

~~integration of the acquired company’s accounting, management information, human resources and other administrative systems;~~

~~liability for activities of the acquired company before~~technology and/or products sufficient to meet our objectives in undertaking the acquisition ~~including intellectual property infringement claims, employee disputes,~~or even to offset the associated acquisition and ~~alleged violations~~maintenance costs.

Table of ~~laws; and~~

Contents

~~unanticipated write-offs~~Depending on the size and nature of future strategic acquisitions, we may acquire assets or ~~charges.~~

~~Our failure~~businesses that require us to ~~address these~~raise additional capital or to operate or manage businesses in which we have limited experience. Making larger acquisitions that require us to raise additional capital to fund the acquisition will expose us to the risks associated with capital raising activities. Acquiring and thereafter operating larger new businesses will also increase our management, operating and reporting costs and burdens (including increased cash requirements). In addition, if we undertake acquisitions, we may issue dilutive equity securities, assume or ~~other problems encountered~~incur additional debt obligations or contingent liabilities, incur large one-time expenses and acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of our business.

We may become involved in securities litigation or stockholder derivative litigation in connection with our ~~past or future acquisitions~~recent Merger, and ~~investments~~this could ~~cause us to fail to realize~~divert the ~~anticipated benefits~~attention of ~~these acquisitions or investments, cause us to incur unanticipated liabilities,~~our management and harm our business, ~~generally. Future acquisitions could also result~~and insurance coverage may not be sufficient to cover all related costs and damages.

Securities litigation or stockholder derivative litigation frequently follows the announcement of certain significant business transactions, such as the sale of a business division or announcement of a business combination transaction. We were involved in ~~dilutive issuances~~this type of litigation in connection with our ~~equity securities,~~recent Merger, and we may become involved in this type of litigation in the ~~incurrence of debt, contingent liabilities, amortization expenses, incremental operating expenses or the write-off of goodwill, any of~~future. Litigation often is expensive and diverts management’s attention and resources, which could ~~harm~~adversely affect our ~~financial condition or operating results.~~

~~Business disruptions could seriously harm our future revenue~~business and ~~financial condition and increase our costs and expenses.~~

~~Our operations, and those~~the company.

A variety of our contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics, acts of terrorism, acts of war and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce and processrisks associated with marketing our product ~~candidates. Our ability~~candidates internationally could materially adversely affect our business.

We plan to ~~obtain clinical supplies~~seek regulatory approval of our product candidates outside of the U.S. and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:

•differing regulatory requirements in foreign countries;

•unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;

•economic weakness, including inflation, or political instability in particular foreign economies and markets;

•compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

•foreign taxes, including withholding of payroll taxes;

•foreign currency fluctuations, which could ~~be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or~~result in increased operating expenses and reduced revenues, and other obligations incident to doing business ~~interruption. Our corporate headquarters are~~ in ~~California near major earthquake faults~~another country;

•difficulties staffing and ~~fire zones. Our operations and financial condition could suffer~~managing foreign operations;

•workforce uncertainty in countries where labor unrest is more common than in the ~~event of a major earthquake, fire~~U.S.;

•differing payor reimbursement regimes, governmental payors or ~~other natural disaster.~~

~~Our employees, independent contractors, clinical investigators, CROs, consultants, commercial partners~~patient self-pay systems, and ~~vendors may engage~~price controls;

•potential liability under the FCPA or comparable foreign regulations;

•challenges enforcing our contractual and intellectual property rights, especially in ~~misconduct or other improper activities, including noncompliance with regulatory standards~~those foreign countries that do not respect and ~~requirements, and insider trading.~~

~~We are exposed~~protect intellectual property rights to the ~~risk~~same extent as the U.S.;

•production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad;

•the impact of ~~employee fraud or other illegal activity by our employees, independent contractors, clinical investigators, CROs, consultants, commercial partners~~public health epidemics on the global economy, such as the coronavirus pandemic currently having an impact throughout the world; and ~~vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to:~~

•business interruptions resulting from geopolitical actions, including war and terrorism.

~~comply with the laws of the FDA~~These and other ~~similar foreign regulatory bodies;~~

If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costsrisks associated with ~~compliance with such laws are also likely to increase. These laws~~international operations may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrange~~ments generally. Activities subject to these laws also include the collection and/or use of information obtained in the course of patient recruitment for clinical trials. The healthcare laws that may~~materially adversely affect our ability to ~~operate include, but~~attain or maintain profitable operations.

We often receive requests for compassionate use access to ~~achieve or sustain profitability~~our investigational drugs by patients that do not meet the entry criteria for enrollment into our clinical trials. Generally, patients requesting compassionate use have no other treatment alternatives for life threatening conditions. We evaluate each compassionate use request on an individual basis, and in some cases grant access to our investigational product candidates outside of our ~~products in such country.~~

~~Recent legislative~~sponsored clinical trials if a physician certifies that the patient receiving treatment is critically ill and ~~regulatory activity may exert downward pressure on potential pricing and reimbursement~~does not meet the entry criteria for ~~our products, if approved, that could materially affect the opportunity to commercialize.~~

The United States and several other jurisdictions are considering, or have already enacted, a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to sell anyone of our ~~products profitably, if approved. Among policy-makers~~open clinical trials. Individual patient results from compassionate use access may not be used to support submission of a regulatory application, may not support approval of a product candidate and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access to healthcare. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives. There have been, and likely will continueshould not be considered to be ~~legislative and~~indicative of results from any on-going or future well-controlled clinical trial. Before we can seek regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect:

~~the demand~~approval for any of our ~~products, if approved;~~

~~our ability to set a price~~product candidates, we must demonstrate in well-controlled clinical trials statistically significant evidence that the product candidate is both safe and effective for the indication we ~~believe is fair for any~~are seeking approval. The results of our ~~products, if approved;~~

compassionate use program may not be used to establish safety or efficacy or regulatory approval.

Table of Contents

~~our ability to generate revenues and achieve or maintain profitability;~~

~~the level of taxes that we are required to pay; and~~

~~the availability of capital.~~

In March 2010, ACA became law in the United States. The goal of ACA is to reduce the cost of healthcare, broaden access to health insurance, constrain healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and health insurance industries, impose taxes and fees on the health industry, impose additional health policy reforms, and substantially change the way healthcare is financed by both governmental and private insurers. While we cannot predict what impact on federal reimbursement policies this legislation will have in general or on our business specifically, ACA may result in downward pressure on pharmaceutical reimbursement, which could negatively affect market acceptance of any of our products, if they are approved. Provisions of ACA relevant to the pharmaceutical industry include the following:

an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, not including orphan drug sales;

an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for most branded and generic drugs, respectively;

a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts on negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;

~~extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;~~

•

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level, thereby potentially increasing manufacturers’ Medicaid rebate liability;

~~expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;~~

new requirements for certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions to report annually certain financial arrangements with physicians and teaching hospitals, as defined in ACA and its implementing regulations, including reporting any payment or “transfer of value” provided to physicians and teaching hospitals and any ownership and investment interests held by physicians and their immediate family members during the preceding calendar year;

expansion of healthcare fraud and abuse laws, including the federal False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;

~~a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in and conduct comparative clinical effectiveness research, along with funding for such research; and~~

~~a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted, or injected.~~

Furthermore, the current presidential administration and Congress are also expected to attempt broad sweeping changes to the current health care laws. We face uncertainties that might result from modification or repeal of any of the provisions of the ACA, including as a result of current and future executive orders and legislative actions. The impact of those changes on us and potential effect on the pharmaceutical and biotechnology industry as a whole is currently unknown. But, any changes to the ACA are likely to have an impact on our results of operations, and may have a material adverse effect on our results of operations. We cannot predict what other healthcare programs and regulations will ultimately be implemented at the federal or state level or the effect of any future legislation or regulation in the United States may have on our business.

We are and will be subject to ~~governmental~~U.S. and certain foreign export and import controls, ~~that~~sanctions, embargoes, anti-corruption laws and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international ~~markets due to licensing requirements~~markets. We can face criminal and/or civil liability and ~~subject us to liability if we are not in compliance with applicable laws.~~

other serious consequences for violations, which can harm our business.

Our ~~products and solutions are~~product candidates will be subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our products and solutions outside of the United States must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.

In addition, changes in our products or solutions or changes in applicable export or import laws and regulations may create delays in the introduction, provision, or sale of our products and solutions in international markets, prevent customers from using our products and solutions or, in some cases, prevent the export or import of our products and solutions to certain countries, governments or persons altogether. Any limitation on our ability to export, provide, or sell our products and solutions could adversely affect our business, financial condition and results of operations.

We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.

~~We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or~~Controls, the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. ~~§ 201,~~§201, the U.S. Travel Act, the USA PATRIOT Act and possibly other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We ~~currently~~ use ~~contract research organizations~~CROs abroad for clinical trials. In addition, we may engage ~~third party~~third-party intermediaries to sell our ~~products~~product candidates and solutions abroad once we enter a commercialization phase for our product candidates and/or to obtain necessary permits, licenses, and other regulatory approvals. We or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners and agents, even if we do not explicitly authorize or have actual knowledge of such activities.

if we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences.

We have adopted an anti-corruption policy, ~~in connection with the consummation of the IPO of our common stock in July 2015. The anti-corruption policy~~which mandates compliance with the FCPA and other anti-corruption laws applicable to our business throughout the world. However, there can be no assurance that our employees and ~~third party~~third-party intermediaries will comply with this policy or such anti-corruption laws. ~~Noncompliance~~Non-compliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other investigations, or other enforcement actions. If such actions are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor, which can result in added costs and administrative burdens.

~~Risks Relating~~

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

There are numerous laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security concerns, and some state privacy laws apply more broadly than the Health Insurance Portability and Accountability Act (HIPAA) and associated regulations. For example, California recently enacted legislation—the California Consumer Privacy Act of 2018 (CCPA)—which went into effect on January 1, 2020. The CCPA, among other things, creates new data privacy and security obligations for covered companies and provides new privacy rights to California consumers, including the right to opt out of certain disclosures of their information. The CCPA also provides for civil penalties as well as a private right of action with statutory damages for certain data breaches, thereby potentially increasing risks associated with a data breach. Although the law includes limited exceptions, including for certain information collected as part of clinical trials as specified in the law, it may regulate or impact our processing of personal information depending on the context. Additionally, a new privacy law, the California Privacy Rights Act (CPRA), was approved by California voters in November 2020 and goes into effect in most material respects on January 1, 2023. The CPRA significantly modified the CCPA, which may require us to modify our practices and policies and may further increase our compliance costs and potential liability. Certain other state laws impose similar privacy obligations, and all 50 states have laws including obligations to provide notification of security breaches of computer databases that contain personal information to affected individuals, state officers and others. For example, the CCPA has prompted the enactment of several new state laws or amendments of existing state laws, such as in New York, Nevada, Virginia, and Colorado. These laws could mark the beginning of a trend toward more stringent privacy legislation in other U.S. states and have prompted a number of proposals for new federal and state-level privacy legislation. To the extent these state laws as well as other federal and state privacy laws, including new laws and changes in existing laws, apply to our business and operations, our compliance costs and potential liability with respect to personal information we collect could expose us to great liability and increase compliance costs.

Table of Contents

There are also various laws and regulations in other jurisdictions relating to privacy and security. For example, European Union (EU) member states and other foreign jurisdictions, including Switzerland, have adopted data protection laws and regulations which impose significant compliance obligations on us. The collection and use of health data in the EU is governed by the EU General Data Protection Regulation (GDPR). The GDPR, which is wide-ranging in scope and applies extraterritorially, imposes several requirements relating to the consent of the individuals to whom the personal data relates, the information provided to such individuals, the security and confidentiality of the personal data, data breach notification, the adoption of appropriate privacy governance, including policies, procedures, training and audits, and the use of third-party processors in connection with the processing of personal data. The GDPR also imposes strict rules on the transfer of personal data out of the EU, including to the U.S., provides an enforcement authority and imposes large penalties for noncompliance, including the potential for fines of up to €20 million or up to 4% of the total worldwide annual global revenues of the noncompliant entity, whichever is greater. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. In addition, in January 2021, following its exit from the EU, the UK transposed the GDPR into its domestic law with its own version of the GDPR (combining the GDPR and the UK Data Protection Act of 2018) (UK GDPR), which currently imposes the same obligations as the GDPR in most material respects and provides for fines of up £17.5 million or up to 4% of the total worldwide annual global revenues of the noncompliant entity, whichever is greater.

Complying with these numerous, complex and often changing regulations is expensive and difficult, and failure to comply with any privacy laws or data security laws or any security incident or breach involving the misappropriation, loss or other unauthorized processing, use or disclosure of sensitive or confidential patient, consumer or other personal information, whether by us, one of our CROs or business associates or another third party, could adversely affect our business, financial condition and results of operations, including but not limited to: investigation costs; material fines and penalties; compensatory, special, punitive and statutory damages; litigation; consent orders regarding our privacy and security practices; requirements that we provide notices, credit monitoring services and/or credit restoration services or other relevant services to impacted individuals; adverse actions against our licenses to do business; reputational damage; and injunctive relief. The recent implementation of the CCPA, GDPR and UK GDPR has increased our responsibility and liability in relation to personal data that we process, including in clinical trials, and we may in the future be required to put in place additional mechanisms to ensure compliance with the CCPA, GDPR, UK GDPR and other applicable laws and regulations, which could divert management’s attention and increase our cost of doing business. In addition, new regulation or legislative actions regarding data privacy and security (together with applicable industry standards) may increase our costs of doing business. In this regard, we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data protection in the U.S., the United Kingdom, the EU and other jurisdictions, and we cannot determine the impact such future laws, regulations and standards may have on our business.

We cannot assure you that our CROs or other third-party service providers with access to our or our customers’, suppliers’, trial patients’ and employees’ personally identifiable and other sensitive or confidential information in relation to which we are responsible will not breach contractual obligations imposed by us, or that they will not experience data security breaches, which could have a corresponding effect on our business, including putting us in breach of our obligations under privacy laws and regulations and/or which could in turn adversely affect our business, results of operations and financial condition. We cannot assure you that our contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, use, storage and transmission of such information. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

We and our third-party contractors must comply with environmental, health and safety laws and regulations. A failure to comply with these laws and regulations could expose us to significant costs or liabilities.

We and any of our third-party contract manufacturers or suppliers are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, generation, manufacture, storage, treatment and disposal of hazardous materials and wastes. Hazardous chemicals, including flammable and biological materials, are involved in certain aspects of our business, and we cannot eliminate the risk of injury or contamination from the use, generation, manufacture, distribution, storage, handling, treatment or disposal of hazardous materials and wastes. In the event of contamination or injury, or failure to comply with such environmental, health and safety laws and regulations, we could be held liable for any resulting damages, fines and penalties associated with such liability, which could exceed our assets and resources.

100

Table of Contents

Although we will maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of biological or hazardous materials, or wastes arising out of and in the course of employment, this insurance may not provide adequate coverage against potential liabilities. We do not maintain comprehensive insurance coverage for liabilities arising from medical or hazardous materials, environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials.

Environmental, health and safety laws and regulations are becoming increasingly more stringent. We may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations. These current or future laws and regulations may impair our research, development, or production efforts, which could harm our business, prospects, financial condition or results of operations. Our ~~Intellectual Property~~

failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.

In both domestic and foreign markets, sales of our product candidates, if approved, depend on the availability of coverage and adequate reimbursement from third-party payors. Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. Regulatory authorities and third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability or that of our collaborators to sell our product candidates profitably. In addition, third‑party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Patients are unlikely to use our product candidates unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our product candidates. Such third-party payors include government health programs such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. Obtaining coverage and adequate reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. In addition, because our product candidates represent new approaches to the treatment of cancer, we cannot accurately estimate the potential revenues from our product candidates.

Government authorities and third-party payors decide which drugs and treatments they will cover and the amount of reimbursement. Coverage decisions may depend upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. These payors may not view our products, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or those of our collaborators, or may not be sufficient to allow our products, if any, to be marketed on a competitive basis. If reimbursement is not available, or is available only to limited levels, our ~~efforts~~product candidates may be competitively disadvantaged, and we, or our collaborators, may not be able to ~~protect~~successfully commercialize our product candidates. Alternatively, securing favorable reimbursement terms may require us to compromise pricing and prevent us from realizing an adequate margin over cost. Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the ~~intellectual property related~~third-party payor’s determination that use of a product is:

•a covered benefit under its health plan;

•safe, effective and medically necessary;

•appropriate for the specific patient;

•cost-effective; and

•neither experimental nor investigational.

101

Table of Contents

In the U.S., no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific and clinical support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained. Moreover, the factors noted above have continued to be the focus of policy and regulatory debate that has, thus far, shown the potential for movement towards permanent policy changes; this trend is likely to continue, and may result in more or less favorable impacts on pricing. The recent and ongoing series of congressional hearings relating to drug pricing has presented heightened attention to the biopharmaceutical industry, creating the potential for political and public pressure, while the potential for resulting legislative or policy changes presents uncertainty. Congress is considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases. The impact of these regulations and any future healthcare measures and agency rules implemented by the Biden administration on us and the pharmaceutical industry as a whole is currently unknown. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved. Complying with any new legislation and regulatory changes could be time-intensive and expensive, resulting in a material adverse effect on our business.

Prices paid for a drug also vary depending on the class of trade. Prices charged to government customers are subject to price controls, including ceilings, and private institutions obtain discounts through group purchasing organizations. Net prices for drugs may be further reduced by mandatory discounts or rebates required by government healthcare programs and demanded by private payors. It is also not uncommon for market conditions to warrant multiple discounts to different customers on the same unit, such as purchase discounts to institutional care providers and rebates to the health plans that pay them, which reduces the net realization on the original sale.

In addition, federal programs impose penalties on manufacturers of drugs marketed under a BLA or NDA, in the form of mandatory additional rebates and/or discounts if commercial prices increase at a rate greater than the Consumer Price Index-Urban, and these rebates and/or discounts, which can be substantial, may impact our ability to raise commercial prices. For example, under the American Rescue Plan Act of 2021, effective January 1, 2024, the statutory cap on Medicaid Drug Rebate Program rebates that manufacturers pay to state Medicaid programs will be eliminated. Elimination of this cap may require pharmaceutical manufacturers to pay more in rebates than it receives on the sale of products, which could have a material impact on our business. Cost control initiatives could cause us, or our collaborators, to decrease, discount, or rebate a portion of the price we, or they, might establish for products, which could result in lower than anticipated product revenues. If the realized prices for our product candidates, if any, decrease or if governmental and other third-party payors do not provide adequate coverage or reimbursement, our prospects for revenues and profitability will suffer.

Even if we obtain coverage for a given product, the resulting approved reimbursement payment rates might not be high enough to allow us to establish or maintain a market share sufficient to realize a sufficient return on our or their investments or achieve or sustain profitability or may require co-payments that patients find unacceptably high. If payors subject our product candidates to maximum payment amounts or impose limitations that make it difficult to obtain reimbursement, providers may choose to use therapies which are less expensive when compared to our product candidates. Additionally, if payors require high co-payments, beneficiaries may decline prescriptions and seek alternative therapies. We may need to conduct post-marketing studies in order to demonstrate the cost-effectiveness of any future products to the satisfaction of hospitals and other target customers and their third-party payors. Such studies might require us to commit a significant amount of management time and financial and other resources. Our future products might not ultimately be considered cost-effective. Adequate third-party coverage and reimbursement might not be available to enable us to maintain price levels sufficient to realize an appropriate return on investment in product development.

We, and our collaborators, cannot be sure that coverage will be available for any product candidate that we, or they, commercialize and, if available, that the reimbursement rates will be adequate. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the U.S. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any of our product candidates for which we obtain marketing approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products, and our overall financial condition.

102

Table of Contents

There have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

•the demand for our product candidates, if we obtain regulatory approval;

•our ability to set a price that we believe is fair for our product candidates;

•our ability to generate revenues and achieve or maintain profitability;

•the level of taxes that we are required to pay; and

•the availability of capital.

Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability. A particular challenge for our product candidates arises from the fact that they will primarily be used in an inpatient setting. Inpatient reimbursement generally relies on stringent packaging rules that may mean that there is no separate payment for our product candidates. Additionally, data used to set the payment rates for inpatient admissions is usually several years old and would not take into account all of the additional therapy costs associated with the administration of our product candidates. If special rules are not created for reimbursement for immunotherapy treatments such as our product candidates, hospitals might not receive enough reimbursement to cover their costs of treatment, which will have a negative effect on their adoption of our product candidates.

We may face difficulties from changes to current regulations and future legislation.

In the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities, and affect our ability, or the ability of our collaborators, to profitably sell any products for which we obtain marketing approval. We expect that current laws, as well as other federal and state healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria, increased regulatory burdens and operating costs, decreased revenues from our biopharmaceutical product candidates, decreased potential returns from our development efforts, and additional downward pressure on the price that we, or our collaborators, may receive for any approved products.

Since enactment of the Affordable Care Act (ACA) in 2010, in both the U.S. and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could impact our ability to sell our product candidates profitably. These changes included aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, effective April 1, 2013, which, due to subsequent legislative amendments, will stay in effect through 2030, with the exception of a temporary suspension implemented under various COVID‑19 relief legislation from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken. Under current legislation, the actual reduction in Medicare payments will vary from 1% in 2022 to up to 4% in the final fiscal year of this sequester. In January 2013, the American Taxpayer Relief Act of 2012 (ATRA) was approved which, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on customers for our product candidates, if approved, and accordingly, our financial operations.

Since its enactment, various portions of the ACA have been subject to judicial and constitutional challenges. In June 2021, the U.S. Supreme Court held that Texas and other challengers had no legal standing to challenge the ACA, dismissing the case without specifically ruling on the constitutionality of the ACA. Accordingly, the ACA remains in effect in its current form. It is unclear how this Supreme Court decision, future litigation, or healthcare measures promulgated by the Biden administration will impact our business, financial condition and results of operations. Complying with any new legislation or reversing changes implemented under the ACA could be time-intensive and expensive, resulting in a material adverse effect on our business.

103

Table of Contents

Any reduction in reimbursement from Medicare or other government healthcare programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenues, attain profitability or commercialize our product candidates.

Legislative and regulatory proposals may also be made to expand post-approval requirements and restrict sales and promotional activities for drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance, or interpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

In addition, there have been increasing legislative efforts and enforcement interest in the U.S. with respect to drug pricing practices, including Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, in 2020, the Trump administration used several means to propose or implement drug pricing reform, including through federal budget proposals, executive orders and policy initiatives, some of which resulted in lawsuits against the U.S. Department of Health and Human Services challenging various aspects of the rules. The impact of these lawsuits as well as legislative, executive, and administrative actions of the Biden administration on us and the pharmaceutical industry as a whole remains unclear. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

We are unable to predict the future course of federal or state healthcare legislation in the U.S. directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. The ACA and any further changes in the law or regulatory framework that reduce our revenues or increase our costs could also have a material and adverse effect on our business, financial condition and results of operations. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our current product candidates and any future product candidates or additional pricing pressures. It is possible that additional governmental action is taken to address the COVID-19 pandemic.

Governments outside the U.S. tend to impose strict price controls, which may adversely affect our revenues, if any.

In international markets, reimbursement and health care payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies. In some countries, particularly the countries of the EU, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost‑effectiveness of our product candidate to other available therapies. There can be no assurance that our product candidates will be considered cost-effective by third-party payors, that an adequate level of reimbursement will be available, or that the third-party payors’ reimbursement policies will not adversely affect our ability to sell our product candidates profitably. If reimbursement of our product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed, possibly materially.

104

Table of Contents

Our employees, independent contractors, consultants, commercial partners, principal investigators, CROs, suppliers and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk of employee fraud or other illegal activity by our employees, independent contractors, consultants, commercial partners, principal investigators, CROs, suppliers and vendors. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to: comply with the laws of the FDA and other similar foreign regulatory bodies, provide true, complete and accurate information to the FDA and other similar foreign regulatory bodies, comply with manufacturing standards we have established, comply with healthcare fraud and abuse laws in the U.S. and similar foreign fraudulent misconduct laws, or report financial information or data accurately or to disclose unauthorized activities to us. If we obtain FDA approval of any of our product candidates and begin commercializing those product candidates in the U.S., our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws and regulations designed to prevent fraud, kickbacks, self‑dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business arrangements. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and serious harm to our reputation.

It is not always possible to identify and deter misconduct or other improper activities by our employees or third parties that we engage for our business operations and the precautions we take to detect and prevent inappropriate conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a material adverse effect on our business, financial condition, results of operations and prospects, including the imposition of significant fines or other sanctions, including exclusion from government healthcare programs, and serious harm to our reputation. In addition, the approval and commercialization of any of our product candidates outside the U.S. will also likely subject us to foreign equivalents of the healthcare laws mentioned above, among other foreign laws. Efforts to ensure that our business arrangements will comply with applicable healthcare laws may involve substantial costs.

Our relationships with health care professionals, institutional providers, principal investigators, consultants, potential customers and third-party payors are, and will continue to be, subject, directly and indirectly, to federal and state health care fraud and abuse, false claims, marketing expenditure tracking and disclosure, government price reporting, and privacy and data security laws. If we are unable to comply, or have not fully complied, with such laws, we could face significant penalties and liabilities.

Our business operations and activities may be directly or indirectly subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act. If we obtain FDA approval for any of our product candidates and begin commercializing those product candidates in the U.S., our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. Our current and future arrangements with healthcare professionals, clinical investigators, CROs, third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute our products for which we obtain marketing approval. In addition, we may be subject to laws of the federal government and state governments in which we conduct our business relating to privacy and data security with respect to patient information. The laws that may affect our ability to operate include, but are not limited to:

•the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made under a federal healthcare program such as Medicare or Medicaid;

•the U.S. federal false claims and civil monetary penalties laws, including the federal civil False Claims Act, which prohibit, among other things, individuals or entities from knowingly presenting or causing to be presented, claims for payment by government funded programs such as Medicare or Medicaid that are false or fraudulent, and which may apply to us by virtue of statements and representations made to customers or third parties;

105

Table of Contents

•the U.S. federal Health Insurance Portability and Accountability Act (HIPAA), which created additional federal criminal statutes that prohibit, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud healthcare programs;

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

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

•state laws comparable to each of the above federal laws, such as, for example, anti-kickback and false claims laws that may be broader in scope and also apply to commercial insurers and other non-federal payors, requirements for mandatory corporate regulatory compliance programs, and laws relating to patient data privacy and security. Other state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government; require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

We expect to incur increased costs of compliance with such laws and regulations as they continue to evolve. If we or our contractors are unable to comply, or have not fully complied, with such laws, we could face penalties, including, without limitation, civil, criminal, and administrative penalties, damages, monetary fines, disgorgement, possible exclusion from participation in Medicare, Medicaid and other federal and state health care programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment or restructuring of our operations. Any of these could adversely affect our business, financial condition, and results of operations.

Risks Related to Intellectual Property

If we are unable to obtain, maintain, protect and enforce patent protection and other proprietary rights for our product candidates and technologies, we may not be able to compete effectively or operate profitably and our ability to prevent our competitors from commercializing similar or identical technology and product candidates would be adversely affected.

Our success is dependent in large part on our ~~market.~~

~~We rely upon a combination of~~obtaining, maintaining, protecting and enforcing patents ~~trade secret protection~~ and ~~confidentiality agreements to protect~~other proprietary rights in the ~~intellectual property related~~U.S. and other countries with respect to our product candidates and ~~technology. Any disclosure~~technology and on our ability to ~~or misappropriation by third parties~~avoid infringing the intellectual property and other proprietary rights of others. Certain of our ~~confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, eroding our competitive position in~~intellectual property rights are licensed from other entities, and as such the ~~market. We believe that we have worldwide commercial rights to the NK-92 cell line~~preparation and ~~we believe that we control commercial use~~prosecution of ~~our aNK, haNK, and taNK cells in key territories. We have developed and in-licensed numerous~~any such patents and patent applications ~~and we possess substantial know-how and trade secrets~~was not performed by us or under our control. Furthermore, patent law relating to the ~~development and commercialization~~scope of Natural Killer cell-based immunotherapy product candidates, including related manufacturing processes and technology. Our owned and licensed patent portfolio consists of patents and pending patent applicationsclaims in the ~~U.S. disclosing~~biotechnology field in which we operate is still evolving and, consequently, patent positions in our industry may not be as strong as in other more well-established fields. The patent positions of biotechnology and pharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved and has been the subject ~~matter directed~~of much litigation in recent years. No consistent policy regarding the breadth of claims allowed in biotechnology patents has emerged to ~~certain~~date. As a result, the issuance, scope, validity, enforceability, or commercial value of our ~~proprietary technology, inventions, and improvements and our most advanced product candidates, as well as licensed and owned~~patent rights remain highly uncertain.

106

Table of Contents

Any future patents ~~and pending applications in jurisdictions outside of the U.S., that, in many cases, are counterparts to the foregoing U.S. patents and patent applications. We believe~~ we have intellectual property rights that are necessary to commercialize aNK, haNK, and taNK cells. However, our patent applications may not result in issued patents, and, even if issued, the patents may be challenged and invalidated. Moreover, our patents and patent applicationsobtain may not be sufficiently broad to prevent others from ~~practicing~~using our technology or from developing competing therapeutics and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents, any of our issued or granted patents will not later be found to be invalid or unenforceable, or any issued or granted patents will include claims sufficiently broad to cover our product candidates and technology, or to provide meaningful protection from our competitors. Our owned or in-licensed pending and future patent applications may not result in patents being issued that protect our N-803, saRNA, hAd5 and yeast technologies, cell-based therapies, aldoxorubicin or other product candidates and technologies or ~~developing~~that effectively prevent others from commercializing competitive technologies and product candidates.

Moreover, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpreted after issuance. Even if patent applications we license or own currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors or other third parties from competing ~~products. We also face the risk~~with us, or otherwise provide us with any competitive advantage. Any patents that ~~others~~we own or in-license may ~~independently develop~~be challenged, narrowed, circumvented, or invalidated by third parties. Consequently, we do not know whether our N-803, saRNA, hAd5 and yeast technologies, cell-based therapies or other product candidates and technologies will be protectable or remain protected by valid and enforceable patents. Our competitors or other third parties may be able to circumvent our patents by developing similar or alternative technologies or products in a non-infringing manner which could materially adversely affect our business, financial condition, results of operations and growth prospects.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability and it is uncertain how much protection, if any, will be provided by our patents, including if they are challenged in the courts or patent offices or in other proceedings, such as re-examinations or oppositions, which may be brought in the U.S. or foreign jurisdictions to challenge the validity of a patent. A third party may challenge the validity or enforceability of a patent after its issuance. It is possible that a competitor may successfully challenge our patents or that a challenge will result in limiting their coverage. Moreover, it is possible that competitors may infringe our patents or successfully avoid the patented technology through design ~~around~~innovation. To counter infringement or other unauthorized use, we may be required to file infringement claims, which can be expensive and time‑consuming, even if we were successful in stopping the violation of our ~~proprietary property.~~

~~The~~patent rights.

We or our licensors may be subject to a third-party preissuance submission of prior art to the USPTO, or become involved in opposition, derivation, revocation, reexamination, post-grant and inter partes review, or interference proceedings or other similar proceedings challenging our owned or licensed patent rights. Should third parties file patent applications, or be issued patents claiming technology also used or claimed by our licensor(s) or by us in any future patent application, ~~process,~~we, or one of our licensors, may be required to participate in interference proceedings in the USPTO to determine priority of invention for those patents or patent applications that are subject to the first-to-invent law in the U.S., or may be required to participate in derivation proceedings in the USPTO for those patents or patent applications that are subject to the first-inventor-to-file law in the U.S. We may be required to participate in such interference or derivation proceedings involving our issued patents and pending applications. We may also ~~known~~be required to participate in post-grant challenge proceedings, such as oppositions in a foreign patent ~~prosecution, is expensive~~office, that challenge our or our licensor’s priority of invention or other features of patentability with respect to our owned or in‑licensed patents and ~~time-consuming,~~patent applications. Such challenges may result in loss of patent rights, loss of exclusivity, or in patent claims being narrowed, invalidated, or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection of our N-803, saRNA, hAd5 and yeast technologies, cell-based therapies or other product candidates and technologies. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate or render unenforceable, our owned or in‑licensed patent rights, allow third parties to commercialize our N-803, saRNA, hAd5 and yeast technologies, cell-based therapies or other product candidates or technologies and compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without infringing third-party patent rights.

107

Table of Contents

If we or our collaborators are unsuccessful in any such proceeding or other priority or inventorship dispute, we may be required to cease using the technology or to obtain and maintain license rights from prevailing third parties, including parties involved in any such interference proceedings or other priority or inventorship disputes. A prevailing party in that case may not offer us a license on commercially acceptable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture, and commercialization of one or more of the product candidates we may develop. The loss of exclusivity or the narrowing of our owned and licensed patent claims could limit our ability to stop others from using or commercializing similar or identical technology and products. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, given the amount of time required for the development, testing, and regulatory review of new product candidates, patents protecting such product candidates might expire before or shortly after such product candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

Some of our owned and in-licensed patents and patent applications are, and may in the future be, co-owned with third parties. In addition, certain of our licensors co-own the patents and patent applications we in-license with other third parties with whom we do not have a direct relationship. Our exclusive rights to certain of these patents and patent applications are dependent, in part, on inter-institutional or other operating agreements between the joint owners of such patents and patent applications, who are not parties to our license agreements. If our licensors do not have exclusive control of the grant of licenses under any such third-party co-owners’ interest in such patents or patent applications or we are otherwise unable to secure such exclusive rights, such co-owners may be able to license their rights to other third parties, including our competitors, and our ~~current~~competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and growth prospects.

If any of our owned or ~~future licensors and licensees~~in-licensed patent applications do not issue as patents in any jurisdiction, we may not be able to ~~prepare,~~compete effectively.

Changes in either the patent laws or their interpretation in the U.S. and other countries may diminish our ability to protect our inventions, obtain, maintain, and enforce our intellectual property rights and, more generally, could affect the value of our intellectual property or narrow the scope of our owned and licensed patents. With respect to both in-licensed and owned intellectual property, we cannot predict whether the patent applications we and our licensors are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficient protection from competitors or other third parties. The patent prosecution process is expensive, time-consuming, and complex, and we may not be able to file, ~~and~~ prosecute, maintain, enforce, or license all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we ~~or our current licensors, or any future licensors or licensees,~~ will fail to identify patentable aspects of ~~inventions made~~our research and development output in ~~the course of development and commercialization activities before it is too late~~time to obtain patent ~~protection on them. Therefore, these~~protection. Although we enter into nondisclosure and confidentiality agreements with parties who have access to confidential or patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, CROs, CMOs, consultants, advisors, and other third parties, any of ~~our patents~~these parties may breach the agreements and ~~applications may not be prosecuted and enforced in~~disclose such output before a ~~manner consistent with the best interests of our business. Defects of form in the preparation or filing of our patents or~~ patent applications may exist, or may arise in the future, for example with respect to proper priority claims, inventorship, etc., although we are unaware of any such defects that we believe are of material import. If we or our current licensors, or any future licensors or licensees, fail to establish, maintain or protect such patents and other intellectual property rights, such rights may be reduced or eliminated. If our current licensors, or any future licensors or licensees, are not fully cooperative or disagree with us as to the prosecution, maintenance or enforcement of any patent rights, such patent rights could be compromised. If there are material defects in the form or preparation of our patents or patent applications, such patents or applications may be invalid and unenforceable. Any of these outcomes could impairapplication is filed, thereby jeopardizing our ability to ~~prevent competition from third parties, which may have an adverse impact on our business.~~

~~The strength of patents in the biopharmaceutical field involves complex legal and scientific questions and can be uncertain. This uncertainty includes changes to the~~seek patent laws through either legislative action to change statutory patent law or court action that may reinterpret existing law or rules in ways affecting the scope or validity of issued patents. The patent applications that we own or in-license may fail to result in issued patents in the United States or foreign countries with claims that cover our product candidates. Even if patents do successfully issue from the patent applications that we own or in-license, third parties may challenge the validity, enforceability or scope of such patents, which may result in such patents being narrowed, invalidated or held unenforceable. For example, patents granted by the European Patent Office may be challenged, also known as opposed, by any person within nine months from the publication of their grant. Any successful challenge to our patents could deprive us of exclusive rights necessary for the successful commercialization of our product candidates. Furthermore, even if they are unchallenged, our patents may not adequately protect our product candidates, provide exclusivity for our product candidates, or prevent others from designing around our claims. If the breadth or strength of protection provided by the patents we hold or pursue with respect to our product candidates is challenged, it could dissuade companies from collaborating with us to develop, or threaten our ability to commercialize our product candidates.

~~Patents have a limited lifespan.~~protection. In the United States, the natural expiration of a patent is generally 20 years after its earliest effective non-provisional filing date. Various extensions may be available; however the life of a patent, and the protection it affords, is limited. Without patent protection for our product candidates, we may be open to competition from generic versions of our product candidates. Further, if we encounter delays in our development efforts, including our clinical trials, the period of time during which we could market our product candidates under patent protection would be reduced.

In addition, to the protection afforded by patents, we also rely on trade secret protection to protect proprietary know-how that may not be patentable or that we elect not to patent, processes for which patents may be difficult to obtain or enforce, and any other elements of our product candidates, and our product development processes (such as a manufacturing and formulation technologies) that involve proprietary know-how, information or technology that is not covered by patents. However, trade secrets can be difficult to protect. If the steps taken to maintain our trade secrets are deemed inadequate, we may have insufficient recourse against third parties for misappropriating any trade secrets. Misappropriation or unauthorized disclosure of our trade secrets could significantly affect our competitive position and may have a material adverse effect on our business. Furthermore, trade secret protection does not prevent competitors from independently developing substantially equivalent information and techniques and we cannot guarantee that our competitors will not independently develop substantially equivalent information and techniques. The FDA, as part of its Transparency Initiative, is currently considering whether to make additional information publicly available on a routine basis, including information that we may consider to be trade secrets or other proprietary information, and it is not clear at the present time how the FDA’s disclosure policies may change in the future, if at all.

In an effort to protect our trade secrets and other confidential information, we require our employees, consultants, advisors, and any other third parties that have access to our proprietary know-how, information or technology, for example, third parties involved in the formulation and manufacture of our product candidates, and third parties involved in our clinical trials to execute confidentiality agreements upon the commencement of their relationships with us. These agreements require that all confidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. However, we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed despite having such confidentiality agreements. Adequate remedies may not exist in the event of unauthorized use or disclosure of our trade secrets. In addition, in some situations, these confidentiality agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants, or advisors have previous employment or consulting relationships. To the extent that our employees, consultants or contractors use any intellectual property owned by third parties in their work for us, disputes may arise as to the rights in any related or resulting know-how and inventions. If we are unable to prevent unauthorized material disclosure of our trade secrets to third parties, we may not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.

~~Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.~~

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly on obtaining and enforcing patents. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity, and therefore, is costly, time-consuming and inherently uncertain. In addition, the United States has recently enacted and is currently implementing wide-ranging patent reform legislation. Further, recent U.S. Supreme Court rulings have either narrowed the scope of patent protection available in certain circumstances or weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained.

For our U.S. patent applications containing a claim not entitled to priority before March 16, 2013, there is a greater level of uncertainty in the patent law. In September 2011, the Leahy-Smith America Invents Act, or the American Invents Act, or AIA, was signed into law. The AIA includes a number of significant changes to U.S. patent law, including provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The USPTO has developed regulations and procedures to govern administration of the AIA, and many of the substantive changes to patent law associated with the AIA. It still remains unclear what other, if any, impact the AIA will have on the operation of our business. Moreover, the AIA and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.

An important change introduced by the AIA is that, as of March 16, 2013, the United States transitioned to a “first-inventor-to-file” system for deciding which party should be granted a patent when two or more patent applications are filed by different parties claiming the same invention. A third party that files a patent application in the USPTO after that date but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by the third party. This will require us to be cognizant going forward of the time from invention to filing of a patent application. Furthermore, our ability to obtain and maintain valid and enforceable patents depends on whether the differences between our ~~technology~~inventions and the prior art allow our ~~technology~~inventions to be patentable over the prior art. ~~Since~~Furthermore, publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the ~~United States~~U.S. and ~~most~~ other ~~countries~~jurisdictions are ~~confidential for a period of time~~typically not published until 18 months after filing, or in some cases not at all. Therefore, we cannot be certain that we or our licensors were the first to ~~either (1) file any patent application related to our product candidates or (2) invent any of~~make the inventions claimed in ~~our patents or patent applications.~~

~~Among some of the other changes introduced by the AIA are changes that limit where a patentee may file a patent infringement suit and providing opportunities for third parties to challenge~~ any ~~issued patent in the USPTO. This applies to all~~ of our ~~U.S.~~owned or licensed patents even those issued before March 16, 2013. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action.

Obtaining and maintaining our patent protection depends on compliance with various procedural, documentary, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent prosecution process. Periodic maintenance fees and various other governmental fees on any issued patent and/or pending patent applications, ~~are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of a patent~~ or patent application. We have systems in place to remind us to pay these fees, and we employ an outside firm and rely on our outside counsel to pay these fees. While an inadvertent lapse may sometimes be cured by payment of a late fee or by other means in accordance with the applicable rules, there are many situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If we fail to maintain the patents and patent applications directed to our product candidates, our competitors might be able to enter the market earlier than should otherwise have been the case, which would have a material adverse effect on our business.

~~Third-party claims alleging intellectual property infringement may adversely affect our business.~~

Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties, for example, the intellectual property rights of competitors. Our research, development and commercialization activities may be subject to claims that we infringe or otherwise violate patents owned or controlled by third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our activities related to our product candidates may give rise to claims of infringement of the patent rights of others. We cannot assure you that our product candidates will not infringe existing or future patents. We may not be aware of patents that have already issued that a third party, for example a competitor in our market, might assert are infringed by our product candidates. It is also possible that patents of which we are aware, but which we do not believe are relevant to our product candidates, could nevertheless be found to be infringed by our product candidates. Nevertheless, we are not aware of any issued patents that we believe would prevent us from marketing our product candidates, if approved. There may also be patent applications that have been filed but not published that, when issued as patents, could be asserted against us.

Third parties making claims against us for infringement or misappropriation of their intellectual property rights may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research, development, manufacturing or sales of the product or product candidate that is the subject of the suit. Defense of these claims, regardless of their merit, would cause us to incur substantial expenses and, and would be a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us by a third party, we may have to (1) pay substantial damages, including treble damages and attorneys’ fees if we are found to have willfully infringed the third party’s patents; (2) obtain one or more licenses from the third party; (3) pay royalties to the third party; and/or (4) redesign any infringing products. Redesigning any infringing products may be impossible or require substantial time and monetary expenditure. Further, we cannot predict whether any required license would be available at all or whether it would be available on commercially reasonable terms. In the event that we could not obtain a license, we may be unable to further develop and commercialize our product candidates, which could harm our business significantly. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us might be nonexclusive, which could result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses on acceptable terms.

~~Defending ourselves~~ or our licensors inwere the first to file for patent protection of such inventions.

108

Table of Contents

We or our licensors, collaborators, or any future strategic partners may become subject to third-party claims or litigation ~~is very expensive, particularly for a company~~alleging infringement of our size, and time-consuming. Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigationpatents or other ~~proceedings could impair our ability~~proprietary rights or seeking to ~~compete in the marketplace. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition~~invalidate patents or ~~results of operations.~~

Weother proprietary rights, and we may ~~become involved in lawsuits~~ need to resort to litigation to protect or enforce our patents or other intellectual property or the patents or other intellectual property of our licensors, all of which could be expensive, time-consuming and ~~time consuming.~~

~~Third parties~~unsuccessful, may ~~infringe~~delay or ~~misappropriate our intellectual property, including our existing patents, patents that may issue to us in~~prevent the ~~future, or the patents~~development and commercialization of our ~~licensors to which we have a license. As a result, we~~product candidates, or may ~~be required to file infringement claims to stop third-party infringement or unauthorized use. Further, we may not be able to prevent, alone or with~~put our ~~licensors, misappropriation of our intellectual property~~patents and other proprietary rights ~~particularly in countries where the laws may not protect those rights as fully as in the United States.~~

~~Generic drug manufacturers may develop, seek approval for, and launch generic versions of our products.~~ at risk.

If we file an infringement action against such a generic drug manufacturer, that company may challenge the scope, validity or enforceability of our or our licensors’ patents, requiring us and/or our licensors to engage in complex, lengthy and costly litigation or other proceedings.

~~For example, if~~ we or one of our licensors ~~initiated~~initiate legal proceedings against a third party to enforce a patent covering one of our product candidates or other technologies, the defendant could counterclaim that the patent ~~covering our product candidates~~ is invalid and/or ~~unenforceable.~~unenforceable or that we infringe their patents. In patent litigation in the ~~United States,~~U.S., defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent.

~~In addition, within and outside~~ Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the ~~United States, there has been a substantial amount of litigation and administrative proceedings, including interference and reexamination proceedings before~~patent withheld relevant information from the USPTO or ~~oppositions and~~ other comparable proceedings in various foreign jurisdictions, regarding patent and other intellectual property rights in the biopharmaceutical industry. Recently, the AIA introduced new procedures including inter partes review and post grant review. The implementation of these procedures brings uncertainty to the possibility of challenges to our patents in the future, including those that patents perceived by our competitors as blocking entry into the market for their products, and the outcome of such challenges.

~~In March 2009, we received~~applicable body, or made a ~~final rejection in one of our original patent applications pertaining to certain limited methods of use~~misleading statement, during prosecution. Third parties may also raise similar claims for NK-92 from the USPTO (but the USPTO allowed claims on all of the other proposed claims, including other methods of use). We filed a Notice of Appeal to the USPTO Board of Appeals and Interferences and a Decision on Appeal was rendered in the fall of 2013. That decision reversed the Examiner’s rejection of the claim to certain limited methods of use with NK-92, but affirmed the Examiner’s rejection of the remaining patent claims. In December 2013, we brought an actionbefore administrative bodies in the U.S. ~~District Court for~~or abroad, even outside the ~~Eastern District~~context of ~~Virginia to~~litigation. Such mechanisms include re-examination, post grant review, the decision of the USPTO as we disagreed with the decision as to the certain limited non-allowed claims. On September 2, 2015, the U.S. District Court granted the USPTO’s motion for summary judgment. On September 24, 2015, we filed a notice of appeal to the United States Court of Appeals for the Federal Circuit. In September 2015, the USPTO filed a Motion for Expenses seeking $0.1 million for attorney’s feesinter partes review, interference proceedings, derivation proceedings, and the USPTO’s expert witness fees. In February 2016, the U.S. District Court denied the USPTO’s Motion for Expenses for attorney’s fees and granted Director’s Motion for Expenses for the USPTO’s expert witness fees. The USPTO filed a notice of appeal on April 5, 2016. In May 2017, the Federal Circuit affirmed the U.S. District Court’s summary judgement ruling. The formal mandate was issued on June 26, 2017. In June 2017, the Federal Circuit reversed the U.S. District Court and remanded the case for the U.S. District Court to enter an award of $0.1 millionequivalent proceedings in favor of the USPTO. On August 31, 2017, a majority of active Federal Circuit judges voted to vacate the June 2017 decision and hear the case en banc sua sponte. The USPTO’s opening en banc brief is due on November 15, 2017.

Such litigation and administrative proceedings could result in revocation of our patents or amendment of our patents such that they do not cover our product candidates. They may also put our pending patent applications at risk of not issuing, or issuing with limited and potentially inadequate scope to cover our product candidates. The outcome following legal assertions of invalidity and unenforceability is unpredictable. foreign jurisdictions (e.g., opposition proceedings).

With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our licensor, our or our licensor’s patent counsel and the patent examiner were unaware during prosecution. ~~Additionally, it is also possible that prior art of which we are aware,~~Moreover, even if our patents were to survive such a litigation challenge to their validity, the patents might still be held to be valid but ~~which we do not believe affects the validity or enforceability of a claim, may, nonetheless, ultimately be found by~~unenforceable if a court were to decide that the patents are being enforced in a manner inconsistent with the antitrust laws, or that the patents were obtained through deceit during patent office examination or other such failure of ~~law or an administrative panel~~sufficient candor to ~~affect~~ the ~~validity or enforceability of a claim, for example if a priority claim is found to be improper.~~patent office. If a ~~defendant~~third party were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss of patent protection could have a material adverse impact on our ~~business.~~

~~Enforcing our~~business, financial condition, results of operations and prospects.

The cost to us of any litigation or ~~our licensor’s~~other proceeding relating to intellectual property rights, ~~through~~even if resolved in our favor, could be substantial. Defense of these claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources, including our scientists and management, from our business.

An adverse result in any litigation or defense proceeding could put one or more of our owned or licensed patents at risk of being invalidated, held unenforceable, or interpreted narrowly, and could put our patent applications at risk of not issuing. Such proceedings could result in revocation or cancellation of, or amendment to, our patents in such a way that they no longer cover our product candidates or technologies. If the outcome of litigation is ~~very expensive, particularly for~~adverse to us, third parties may be able to use our patented invention without payment to us. In addition, in an infringement proceeding, there is a ~~company~~risk that a court may decide that one or more of our ~~size,~~patents is not valid or is unenforceable and ~~time-consuming.~~that we do not have the right to stop the other party from using the inventions. There is also the risk that, even if the validity of our patents were upheld, a court would refuse to stop the other party on the grounds that its activities are not covered by, that is, do not infringe, our patents. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation.

In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be better able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial ~~resources. Patent litigation~~resources and ~~other proceedings may also absorb significant management time.~~more mature and developed intellectual property portfolios. The outcome following legal assertions of invalidity and unenforceability is unpredictable. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could ~~impair~~have a material adverse effect on our ability to compete in the marketplace.

109

Table of Contents

The use of our technology and product candidates could potentially conflict with the rights of others, and third-party claims of intellectual property infringement, misappropriation or other violation against us, our licensors or our collaborators may prevent or delay the development and commercialization of our product candidates and technologies.

Our commercial success depends in part on our, our licensors’ and our collaborators’ ability to avoid infringing, misappropriating and otherwise violating the patents and other intellectual property rights of third parties. There is a substantial amount of complex litigation involving patents and other intellectual property rights in the biopharmaceutical industry. Our potential competitors or other parties may have, develop or acquire patent or other intellectual property rights that they could assert against us. If they do so, then we may be required to alter our product candidates, pay licensing fees or cease our development and commercialization activities with respect to the applicable product candidates or technologies. If our product candidates conflict with patent or other intellectual property rights of others, such parties could bring legal actions against us or our collaborators, licensees, suppliers or customers, claiming damages and seeking to enjoin manufacturing, use and marketing of the affected products.

Although we have conducted freedom-to-operate (FTO) analyses of the patent landscape with respect to our lead product candidates and continue to undertake FTO analyses of our manufacturing processes, 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, and contemplated future processes and products, because patent applications do not publish for 18 months, and because the claims of patent applications can change over time, no FTO analysis can be considered exhaustive. We may not be aware of patents that have already been issued and that a competitor or other third party might assert are infringed by our current or future product candidates or technologies. It is also possible that we could be found to have infringed patents owned by third parties of which we are aware, but which we do not believe are relevant to our product candidates or technologies. In addition, because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates or technologies may infringe. Furthermore, patent and other intellectual property rights in biotechnology remains an evolving area with many risks and uncertainties. As such, we may not be able to ensure that we can market our product candidates without conflict with the rights of others.

If intellectual property-related legal actions asserted against us are successful, in addition to any potential liability for damages (including treble damages and attorneys’ fees for willful infringement), we could be enjoined from, or required to obtain a license to continue, manufacturing, promoting the use of or marketing the affected products. We may not prevail in any legal action and a required license under the applicable patent or other intellectual property may not be available on acceptable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. We also could be required to redesign our infringing products, which may be impossible or require substantial time and monetary expenditure.

Defense of infringement claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of management and other employee resources from our business, and may impact our reputation. Some of our competitors may be able to sustain the costs of litigation or administrative proceedings more effectively than we can because of greater financial resources. In addition, there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition, or results of ~~operations.~~

~~Furthermore, because~~operations and prospects.

110

Table of Contents

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

As is the case with other immunotherapy and biopharmaceutical companies, our success is dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain. In addition, the U.S. has recently enacted and is currently implementing wide-ranging patent reform legislation. Assuming that other requirements for patentability are met, prior to March 2013, in the U.S., the first to invent the claimed invention was entitled to the patent, while outside the U.S., the first to file a patent application was entitled to the patent. After March 2013, under the Leahy-Smith America Invents Act (the America Invents Act) enacted in September 2011, the U.S. transitioned to a first-to-file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application in the USPTO after March 2013, but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant of the ~~substantial amount~~time from invention to filing of ~~discovery required~~a patent application. Since patent applications in ~~connection~~the U.S. and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either file any patent application related to our product candidates or other technologies or invent any of the inventions claimed in our or our licensor’s patents or patent applications. The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO-administered post-grant proceedings, including post-grant review, inter partes review, and derivation proceedings. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

Additionally, U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. While we do not believe that any of the patents owned or licensed by us will be found invalid based on the foregoing, we cannot predict how future decisions by Congress, the federal courts or the USPTO may impact the value of our patents.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment, and other requirements imposed by government patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees, and various other government fees on patents and patent applications are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of a patent. The USPTO and various foreign governmental patent agencies require compliance with several procedural, documentary, fee payment and other similar provisions during the patent application process. In certain circumstances, we rely on our licensors to pay these fees and take the necessary actions to comply with these requirements. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. In such an event, our competitors might be able to enter the market with similar or identical products or technology, which would have a material adverse impact on our business, financial condition, results of operations and prospects.

111

Table of Contents

Our rights to develop and commercialize our product candidates and technologies are subject, in part, to the terms and conditions of licenses granted to us by others.

We will rely on licenses to certain patent rights and proprietary technology from third parties that are important or necessary to the development of aldoxorubicin as well as products enabled by our adenoviral and yeast, including Tarmogen, vaccine technologies.

License agreements may not provide exclusive rights to use certain licensed intellectual property ~~litigation~~and technology in all relevant fields of use and in all territories in which we may wish to develop or ~~administrative proceedings, there is~~commercialize our technology and product candidates in the future. As a ~~risk~~result, we may not be able to prevent competitors or other third parties from developing and commercializing competitive products that ~~some~~also utilizes technology that we have in-licensed.

In addition, subject to the terms of any such license agreements, we do not have the right to control the preparation, filing, prosecution and maintenance, and we may not have the right to control the enforcement, and defense of patents and patent applications covering the technology that we license from third parties. We cannot be certain that our in-licensed or out-licensed patents and patent applications that are controlled by our licensors or licensees will be prepared, filed, prosecuted, maintained, enforced, and defended in a manner consistent with the best interests of our ~~confidential information~~business. If our licensors or licensees fail to prosecute, maintain, enforce, and defend such patents, or lose rights to those patents or patent applications, the rights we have licensed may be reduced or eliminated, our right to develop and commercialize N-803 and any of our product candidates that are subject of such licensed rights could be ~~compromised by disclosure.~~adversely affected, and we may not be able to prevent competitors from making, using and selling competing products. In addition, ~~during~~even where we have the ~~course~~right to control patent prosecution of ~~litigation~~patents and patent applications we have licensed to and from third parties, we may still be adversely affected or ~~administrative proceedings, there could~~prejudiced by actions or inactions of our licensees, our licensors and their counsel that took place prior to the date upon which we assumed control over patent prosecution.

Furthermore, our owned and in-licensed patents may be ~~public announcements~~subject to a reservation of rights by one or more third parties. For example, certain of our in-licensed intellectual property was funded in part by the U.S. government. As a result, the U.S. government may have certain rights to such intellectual property. When new technologies are developed with U.S. government funding, the U.S. government generally obtains certain rights in any resulting patents, including a non-exclusive license authorizing the U.S. government to use the invention or to have others use the invention on its behalf. The U.S. government’s rights may also permit it to disclose the funded inventions and technology to third parties and to exercise march-in rights to use or allow third parties to use the technology we have licensed that was developed using U.S. government funding. The U.S. government may exercise its march-in rights if it determines that action is necessary because we fail to achieve practical application of the government-funded technology, or because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the U.S. in certain circumstances if this requirement is not waived. Any exercise by the U.S. government of such rights or by any third party of its reserved rights could have a material adverse effect on our competitive position, business, financial condition, results of hearings, motions or other interim proceedings or developments or public access to related documents. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed.

operations and growth prospects.

If we fail to comply with our ~~obligation~~obligations in ~~any of~~ the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we may be required to pay damages and we could lose license rights that are important to our business.

~~Licensing~~

We have entered into license agreements with third parties and may need to obtain additional licenses from others to advance our research or allow commercialization of ~~intellectual property rights is~~our product candidates. We may be unable to obtain certain additional licenses at a reasonable cost or on reasonable terms, if at all. In that event, we may be required to expend significant time and resources to redesign our technology, product candidates, or the methods for manufacturing them or to develop or license replacement technology, all of ~~critical importance~~which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected product candidates or continue to utilize our existing technology, which could harm our business, financial condition, results of operations and growth prospects significantly. We cannot provide any assurances that third-party patents do not exist which might be enforced against our current technology, manufacturing methods, product candidates, or future methods or products resulting in either an injunction prohibiting our manufacture or future sales, or, with respect to our ~~business and involves complex legal, business and scientific issues. We rely~~future sales, an obligation on our exclusive license from Hans Klingemann, M.D., Ph.D., one of our founders and the inventor of our aNK and related platform product cell therapies, and may rely on our exclusive licenses from Rush University Medical Center and other licensors such as Fox Chase Cancer Research Center and the University Health Network. If we fail to comply with the diligence obligations or otherwise materially breach our license agreement, and fail to remedy such failure or cure such breach, the licensor may have the right to terminate the license.

~~Our obligation~~part to pay royalties and/or other forms of compensation to ~~Dr. Klingemann~~third parties, which could be significant.

112

Table of Contents

In addition, each of our license agreements, and we expect our future agreements, will impose various development, diligence, commercialization, and other obligations on us. Certain of our license agreements also require us to meet development timelines, or to exercise commercially reasonable efforts to develop and commercialize licensed products, in order to maintain the licenses. In spite of our efforts, our licensors might conclude that we have materially breached our obligations under such license agreements and might therefore terminate the license ~~agreement, as amended, runs until the expiration of~~agreements, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, competitors or other third parties would have the freedom to seek regulatory approval of, and ~~the license agreement~~to market, products identical to ours and we may be ~~terminated earlier by either party for material breach. Under the license agreement, we have the right~~required to ~~enforce the licensed patents. Our license agreement with Rush University Medical Center terminates on the 12th anniversary~~cease our development and commercialization of certain of our ~~first payment~~product candidates or of ~~royalties, at which point~~N-803. Any of the ~~license is deemed perpetual, irrevocable, fully-paid royalty-free, exclusive license,~~foregoing could have a material adverse effect on our competitive position, business, financial conditions, results of operations and ~~may be terminated earlier by either party for material breach.~~

~~Disputes~~growth prospects.

Moreover, disputes may arise ~~between us and our licensors~~ regarding intellectual property ~~rights~~ subject to a ~~license~~licensing agreement, including:

•the scope of rights granted under the license agreement and other interpretation-related issues;

•the extent to which our ~~right to sublicense~~technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

•the sublicensing of patent and other rights ~~to third parties~~ under our collaborative development relationships; ~~and~~

•our diligence obligations ~~with respect to~~under the ~~use of the licensed technology in relation to our development and commercialization of our product candidates,~~license agreement and what activities satisfy those diligence ~~obligations.~~

obligations;

~~While we would expect to exercise all rights~~

•the inventorship and ~~remedies available to us, including seeking to cure any breach~~ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and ~~otherwise seek~~our partners; and

•the priority of invention of patented technology.

In addition, the agreements under which we currently license intellectual property or technology from third parties are complex, and certain provisions in such agreements may be susceptible to ~~preserve~~multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the ~~patents licensed to us, we may not be able to do so in a timely manner, at an acceptable cost or at all. Generally, the loss~~relevant agreement, either of ~~any one of our current licenses, or any other license we may acquire in the future, could materially harm our business, prospects, financial condition and results of operations.~~

Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and other proprietary information and may not adequately protect our intellectual property, which ~~could limit our ability to compete.~~

Because we operate in the highly technical field of research and development, we rely in part on trade secret protection in order to protect our proprietary trade secrets and unpatented know-how. However, trade secrets are difficult to protect, and we cannot be certain that others will not develop the same or similar technologies on their own. We have taken steps, including entering into confidentiality agreements with our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors, to protect our trade secrets and unpatented know-how. These agreements generally require that the other party keep confidential and not disclose to third parties all confidential information developed by the party or made known to the party by us during the course of the party’s relationship with us. We also typically obtain agreements from these parties which provide that inventions conceived by the party in the course of rendering services to us will be our exclusive property. However, these agreements may not be honored and may not effectively assign intellectual property rights to us. Enforcing a claim that a party illegally obtained and is using our trade secrets or know-how is difficult, expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets or know-how. The failure to obtain or maintain trade secret protection could adversely affect our competitive position.

~~We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.~~

We have received confidential and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise improperly used or disclosed confidential information of these third parties or our employees’ former employers. Further, we may be subject to ownership disputes in the future arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates. We may also be subject to claims that former employees, consultants, independent contractors, collaborators or other third parties have an ownership interest in our patents or other intellectual property. Litigation may be necessary to defend against these and other claims challenging our right to and use of confidential and proprietary information. If we fail in defending any such claims, in addition to paying monetary damages, we may lose our rights therein. Such an outcome could have a material adverse effect on our ~~business. Even~~business, financial condition, results of operations and growth prospects. Moreover, if disputes over intellectual property that we ~~are successful in defending against these claims, litigation~~have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could ~~result in substantial cost~~have a material adverse effect on our business, financial conditions, results of operations and ~~be a distraction to our management~~growth prospects.

We have limited foreign intellectual property rights and ~~employees.~~

We may not be able to protect our intellectual property rights in various jurisdictions throughout the world.

We strive to control cell line distribution as well as limit commercial use through licenses and material transfer agreements with third parties in addition to its patents and patent applications. However, a company may illicitly obtain our cells or create their own modified variants and attempt to commercialize them in foreign countries where we do not have ~~any patents or patent applications where legal recourse may be limited. This may have a significant commercial impact on our foreign business operations.~~

limited intellectual property rights outside the U.S. Filing, prosecuting and defending patents on ~~our~~ product candidates in all countries throughout the world would be prohibitively ~~expensive. The requirements for patentability may differ~~expensive, and our intellectual property rights in ~~certain~~some countries ~~particularly developing countries. For example, China has a heightened requirement for patentability, and specifically requires a detailed description of medical uses of a claimed drug.~~outside the U.S. can be less extensive than those in the U.S. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the ~~United States.~~U.S. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the ~~United States.~~U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement ~~on infringing activities~~ is ~~inadequate.~~not as strong as that in the U.S. These products may compete with our ~~products,~~product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

113

Table of Contents

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to ~~pharmaceuticals,~~biopharmaceutical products, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, certain countries in Europe and certain developing countries, including India and China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In those countries, we may have limited remedies if our patents are infringed or if we are compelled to grant a license to our patents to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we ~~own~~develop or license. ~~Finally,~~

Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed trade secrets or other confidential information of third parties or claims asserting ownership of what we regard as our own intellectual property.

We have received confidential and proprietary information from third parties and their employees and contractors. In addition, we plan to employ and contract with individuals who were previously employed at other biotechnology or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed the trade secrets or other confidential information of these third parties or our employees’ former employers. Litigation may be necessary to defend against or pursue these claims. Even if we are successful in resolving these claims, litigation could result in substantial cost and be a distraction to our management and employees.

In addition, while it is our policy to require our employees, consultants and independent contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We may not be able to license or acquire new or necessary intellectual property rights or technology from third parties.

An element of our intellectual property strategy is to license intellectual property rights and technologies from third parties and/or our affiliates. Other parties, including our competitors or our affiliates, may have patents relevant to our business, may have already filed patent applications relevant to our business, and are likely filing patent applications potentially relevant to our business. In order to avoid infringing these patents, we may find it necessary or prudent to obtain licenses to such patents from such parties. In addition, with respect to any patents we co-own with other parties, including our affiliates, we may require licenses to such co-owners’ interest to such patents. The licensing or acquisition of intellectual property rights is a competitive area, and other more established companies may pursue strategies to license or acquire third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources, and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. No

114

Table of Contents

assurance can be given that we will be successful in licensing any additional rights or technologies from third parties and/or our affiliates. Our inability to license the rights and technologies that we have identified, or that we may in the future identify, could have a material adverse impact on our ability to complete the development of our product candidates or to develop additional product candidates. Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensing and royalty payments. Failure to obtain any necessary rights or licenses may detrimentally affect our planned development of our current or future additional product candidates and could increase the cost, and extend the timelines associated with our development, of such other products, and we may have to abandon development of the relevant program or product candidate. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

If we do not obtain patent term extension and data exclusivity for any product candidates we may develop, our business may be materially harmed.

Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may develop, one or more of our owned or in-licensed U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984 (the Hatch-Waxman Act). The Hatch-Waxman Act permits a patent term extension of up to five years as compensation for patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval. Only one patent may be extended per new drug, and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. Similar extensions as compensation for patent term lost during regulatory review processes are also available in certain foreign countries and territories, such as in Europe under a Supplementary Patent Certificate. However, we may not be granted an extension in the U.S. and/or foreign countries and territories because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is shorter than what we request, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations and growth prospects could be materially harmed.

We may be subject to claims challenging rights in our patents and other intellectual property.

We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets, or other intellectual property, including as an inventor or co-inventor. For example, we or our licensors may have disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship, or our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of or right to use valuable intellectual property. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

115

Table of Contents

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to seeking patents for N-803, saRNA, hAd5 and yeast technologies, cell therapies, and other product candidates and technologies, we also rely on trade secrets and confidentiality agreements to protect our unpatented know-how, technology, and other proprietary information and to maintain our competitive position. Trade secrets and know-how can be difficult to protect. We expect our trade secrets and know-how will over time be disseminated within the industry through independent development, the publication of journal articles describing the methodology, and the movement of personnel from academic to industry scientific positions.

We seek to protect these trade secrets and other proprietary technology, in part, by entering into nondisclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, CROs, CMOs, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants as well as train our employees not to bring or use proprietary information or technology from former employers to us or in their work, and remind former employees when they leave their employment of their confidentiality obligations. We cannot guarantee that we have entered into such agreements with each party that may have or have had access to our trade secrets or proprietary technology and processes. Despite our efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the U.S. are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or other third party, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be materially and adversely harmed.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition among potential partners or customers in our markets of interest. At times, competitors or other third parties may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected. Our efforts to enforce or protect our proprietary rights related to trademarks, trade secrets, domain names, copyrights or other intellectual property may be ineffective and could result in substantial costs and diversion of resources and could adversely affect our business, financial condition, results of operations and growth prospects.

Intellectual property rights do not necessarily address all potential threats.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. For example:

•others may be ~~adversely affected~~able to make products that are similar to our product candidates or utilize similar technology but that are not covered by ~~unforeseen changes~~the claims of the patents that we license or may own;

•we, or our current or future licensors or collaborators, might not have been the first to make the inventions covered by the issued patent or pending patent application that we license or own now or in ~~foreign~~the future;

•we, or our current or future licensors or collaborators, might not have been the first to file patent applications covering certain of our or their inventions;

116

Table of Contents

•others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our owned or licensed intellectual property ~~laws.~~

rights;

•it is possible that our current or future pending owned or licensed patent applications will not lead to issued patents;

•issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our competitors or other third parties;

•our competitors or other third parties might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

•we may not develop additional proprietary technologies that are patentable;

•the patents of others may harm our business; and

•we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property.

Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

Risks ~~Relating~~Related to Our Common Stock

and CVRs

Dr. Soon-Shiong, our Executive Chairman, Global Chief Scientific and Medical Officer and our principal stockholder, has significant interests in other companies which may conflict with our interests.

Our Executive Chairman, Global Chief Scientific and ~~CEO~~Medical Officer and ~~entities~~our principal stockholder, Dr. Soon-Shiong, is the founder of NantWorks. The various NantWorks companies are currently exploring opportunities in the immunotherapy, oncology, infectious disease and inflammatory disease fields. In particular, we have agreements with a number of related parties that provide services, technology and equipment for use in their efforts to develop their product pipelines. Dr. Soon-Shiong holds a controlling interest, either directly or indirectly, in these entities. Consequently, Dr. Soon-Shiong’s interests may not be aligned with our other stockholders and he may from time to time be incentivized to take certain actions that benefit his other interests and that our other stockholders do not view as being in their interest as investors in our company. In addition, other companies affiliated with ~~him collectively own~~Dr. Soon-Shiong may compete with us for business opportunities or, in the future, develop products that are competitive with ours (including products in other therapeutic fields which we may target in the future). Moreover, even if they do not directly relate to us, actions taken by Dr. Soon-Shiong and the companies with which he is involved could impact us.

We are also pursuing supply arrangements for various investigational agents controlled by affiliates to be used in their clinical trials. If Dr. Soon-Shiong were to cease his affiliation with us or NantWorks, these entities may be unwilling to continue these relationships with us on commercially reasonable terms, or at all, and as a ~~significant majority~~result may impede our ability to control the supply chain for our combination therapies. These collaboration agreements do not typically specify how sales will be apportioned between the parties upon successful commercialization of the product. As a result, we cannot guarantee that we will receive a percentage of the revenues that is at least proportional to the costs that we will incur in commercializing the product candidate.

We have entered into shared services agreements with NantWorks, pursuant to which NantWorks and its affiliates provide corporate, general and administrative and other support services to us. If Dr. Soon-Shiong was to cease his affiliation with us or with NantWorks, we may be unable to establish or maintain this relationship with NantWorks on a commercially reasonable basis, if at all. As a result, we could experience a lack of business continuity due to loss of historical and institutional knowledge and a lack of familiarity of new employees and/or new service providers with business processes, operating requirements, policies and procedures, and we may incur additional costs as new employees and/or service providers gain necessary experience. In addition, the loss of the services of NantWorks might significantly delay or prevent the development of our product candidates or achievement of other business objectives by diverting management’s attention to transition matters and identification of suitable replacements, if any, and could have a material adverse effect on our business and results of operations.

117

Table of Contents

Dr. Soon-Shiong, through his voting control of the company, has the ability to control actions that require stockholder approval.

Dr. Soon-Shiong, through his direct and indirect ownership of the company’s common stock, ~~and will exercise significant influence over matters requiring stockholder approval, regardless~~has voting control of the ~~wishes of other stockholders.~~

company. As of September 30, 2022, Dr. Soon-Shiong and his affiliates own approximately 78.3% of the company’s common stock outstanding.

Additionally, an affiliate of Dr. Soon-Shiong holds a warrant to purchase 1,638,000 shares of the company’s common stock that will become exercisable if certain performance conditions are satisfied. Dr. Soon-Shiong and his related party also hold approximately $279.5 million in the aggregate of CVRs issued to the former stockholders of Altor in connection with the 2017 ~~our Chairman~~acquisition of Altor. If the underlying conditions for payment are met, the CVRs become payable in cash or shares of the company’s common stock or any combination as the holder elects. Dr. Soon-Shiong and ~~CEO, Patrick~~his related party have both irrevocably agreed to receive shares of the company’s common stock in satisfaction of their CVRs.

As of September 30, 2022, the company has a $300.0 million promissory note with an entity affiliated with Dr. Soon-Shiong ~~M.D.~~that is due and payable on December 31, 2023. In the event of a default on the loan (as defined in the promissory note), including if the company does not repay the loan at maturity, the company has the right, at its sole option, to convert the outstanding principal amount and accrued and unpaid interest due under this note into shares of the company’s common stock at price of $5.67 per share. In addition, entities affiliated with ~~him, collectively own approximately 58.9%~~Dr. Soon-Shiong hold fixed-rate promissory notes representing $315.7 million in indebtedness (including principal and accrued and unpaid interest) as of September 30, 2022. These notes include a conversion feature that gives each lender the right at any time, including upon notice of prepayment, at its sole option, 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.

Dr. Soon-Shiong also has a total of 1,626,064 stock options outstanding ~~shares~~as of ~~our common stock. Additionally,~~ September 30, 2022, of which 926,064 are exercisable and 700,000 are unvested and unexercisable.

Dr. Soon-Shiong is in a position to control the ~~owner~~outcome of ~~options,~~corporate actions that require, or may be accomplished by, stockholder approval, including amending the bylaws of the company, the election or removal of directors and transactions involving a ~~warrant~~change of control. Dr. Soon-Shiong’s controlling ownership could limit the ability of the remaining stockholders of the company to influence corporate matters, and ~~restricted stock units to purchase an aggregate~~the interests of ~~20.3 million shares~~Dr. Soon-Shiong may not coincide with the company’s interests or the interests of ~~our common stock which would give him and his affiliates ownership of approximately 67.3% of our outstanding shares of common stock if they were fully vested and exercised in full.~~ its remaining stockholders.

In addition, pursuant to the Nominating Agreement between us and Cambridge Equities, LP ~~or Cambridge,~~(Cambridge), an entity that Dr. Soon-Shiong controls, Cambridge has the ability to designate one director to be nominated for election to ~~our board~~the Board of ~~directors~~Directors for as long as Cambridge continues to hold at least 20% of the issued and outstanding shares of our common stock. Dr. Soon-Shiong was selected by Cambridge to hold this board seat. Dr. Soon-Shiong and his affiliates will therefore have significant influence over management and significant control over matters requiring stockholder approval, including the annual election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, for the foreseeable future. This ~~concentrated~~ control will limit stockholders’ ability to influence corporate matters and, as a result, we may take actions that our stockholders do not view as beneficial. As a result, the market price of our common stock could be adversely affected.

~~We do not know whether an active, liquid and orderly trading market will develop for our common stock or what the~~

The market price of our common stock ~~will~~has been and may continue to be volatile, and ~~as a result it~~investors may ~~be difficult for you to sell your shares of our common stock.~~

~~Prior to our IPO in July 2015, there was no public market for our common stock.~~ have difficulty selling their shares.

Although our common stock is listed on ~~The NASDAQ~~the Nasdaq Global Select Market, the market for our shares has demonstrated varying levels of trading activity. You may not be able to sell your shares quickly or at the market price if trading in shares of our common stock is not active. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products by using our shares of common stock as consideration.

~~The market price~~

118

Table of ~~our common stock has been and may continue to be volatile.~~

Contents

The stock market in general and the market for biopharmaceutical companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price of our common stock has been and may continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including:

•the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;

•any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;

•adverse results or delays in clinical trials;

•our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;

•adverse regulatory decisions, including failure to receive regulatory approval of our product ~~candidates~~

•

~~changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;~~

candidates;

•changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;

•our failure to commercialize our product candidates;


3530 John Hopkins Court San Diego,, California						92121
(Address of principal executive offices)						(Zip Code)

		~~Page~~
					Page
	~~Part I – Financial Information~~
PART I—FINANCIAL INFORMATION

Item 1.			Financial Statements			1
	Condensed Consolidated Balance Sheets – As of September 30, 2022 and December 31, 2021		1
	Condensed Consolidated Statements of Operations – For the three and nine months ended September 30, 2022 and 2021		2
	Condensed Consolidated Statements of Comprehensive Loss – For the three and nine months ended September 30, 2022 and 2021		3
	Condensed Consolidated Statements of Stockholders’ Deficit – For the three and nine months ended September 30, 2022 and 2021		4
	Condensed Consolidated Statements of Cash Flows – For the nine months ended Septembe r 30, 2022 and 2021		6
	Notes to Unaudited Condensed Consolidated Financial Statements		8
Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations			23 39
Item 3.			Quantitative and Qualitative Disclosures about Market Risk			39 59
Item 4.			Controls and Procedures			39 59

PART II—OTHER INFORMATION			~~Part II – Other Information~~

Item 1.			Legal Proceedings			40 60
Item 1A.			Risk Factors			41 60
Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds			77 124
Item 3.			Defaults Upon Senior Securities			77 124
Item 4.			Mine Safety Disclosures			77 124
Item 5.			Other Information			78 124
Item 6.			Exhibits	125
Signatures			78 126


	September 30, 2017			December 31, 2016				September 30, 2022		December 31, 2021
	(Unaudited)							(Unaudited)
ASSETS							ASSETS
Current assets:							Current assets:
Cash and cash equivalents	$	20,920		$	8,083		Cash and cash equivalents	$	104,161	$	181,101
Marketable securities							Marketable securities	6,896		136,015
Due from related parties		61			1,089		Due from related parties	1,488		1,333
Prepaid expenses and other current assets		4,525			5,135
Marketable securities		131,347			190,838
Prepaid expenses and other current assets (including amounts with related parties)							Prepaid expenses and other current assets (including amounts with related parties)	30,547		15,898
Total current assets		156,853			205,145		Total current assets	143,092		334,347
Marketable securities, noncurrent		34,198			87,571		Marketable securities, noncurrent	811		822
Property, plant and equipment, net		74,471			18,906		Property, plant and equipment, net	130,441		82,863
Cost method investment		8,500			—

Intangible assets, net		3,391			5,086		Intangible assets, net	20,471		1,420
Other assets		324			788
Convertible note receivable							Convertible note receivable	6,566		6,379
Operating lease right-of-use assets, net (including amounts with related parties)							Operating lease right-of-use assets, net (including amounts with related parties)	46,429		36,304
Other assets (including amounts with related parties)							Other assets (including amounts with related parties)	5,133		6,775
Total assets	$	277,737		$	317,496		Total assets	$	352,943	$	468,910
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES AND STOCKHOLDERS’ DEFICIT							LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:							Current liabilities:
Accounts payable	$	9,485		$	4,045		Accounts payable	$	20,237	$	11,418
Accrued expenses		15,838			5,864
Accrued expenses and other liabilities							Accrued expenses and other liabilities	46,220		51,387
Related-party promissory note, net of deferred issuance costs							Related-party promissory note, net of deferred issuance costs	—		299,236
Due to related parties		1,986			1,753		Due to related parties	3,018		3,943
Other current liabilities		1,365			891
Operating lease liabilities (including amounts with related parties)							Operating lease liabilities (including amounts with related parties)	1,365		3,011
Total current liabilities		28,674			12,553		Total current liabilities	70,840		368,995
Build-to-suit liability, less current portion		5,062			5,651
Financing obligation, less current portion		1,814			2,025
Deferred rent		3,461			2,426
Deferred tax liability		681			996
Related-party promissory notes, net of discount, less current portion (Note 9)							Related-party promissory notes, net of discount, less current portion (Note 9)	373,293		306,349
Related-party convertible notes and accrued interest, net of discount, less current portion (Note 9)							Related-party convertible notes and accrued interest, net of discount, less current portion (Note 9)	287,761		—
Operating lease liabilities, less current portion (including amounts with related parties)							Operating lease liabilities, less current portion (including amounts with related parties)	49,561		37,068

Other liabilities		341			427		Other liabilities	569		411
Total liabilities		40,033			24,078		Total liabilities	782,024		712,823
Commitments and contingencies (Note 8)
Stockholders’ equity
Common stock, $0.0001 par value; 500,000,000 shares authorized; 79,440,700 and 81,983,937 issued and outstanding as of September 30, 2017 and December 31, 2016		8			8
Commitments and contingencies (Note 7)							Commitments and contingencies (Note 7)
Stockholders’ deficit:							Stockholders’ deficit:
Common stock, $0.0001 par value; 900,000,000 and 500,000,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively; 400,304,106 and 397,830,044 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively; excluding treasury stock, 163,800 shares outstanding as of September 30, 2022 and December 31, 2021, respectively							Common stock, $0.0001 par value; 900,000,000 and 500,000,000 shares authorized as of September 30, 2022 and December 31, 2021, respectively; 400,304,106 and 397,830,044 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively; excluding treasury stock, 163,800 shares outstanding as of September 30, 2022 and December 31, 2021, respectively	40		40
Additional paid-in capital		709,353			680,757		Additional paid-in capital	1,843,724		1,719,704
Accumulated other comprehensive loss		(202	)		(284	)
Accumulated deficit		(471,455	)		(387,063	)	Accumulated deficit	(2,270,273)		(1,961,921)
Total stockholders’ equity		237,704			293,418
Total liabilities and stockholders’ equity	$	277,737		$	317,496
Accumulated other comprehensive (loss) income							Accumulated other comprehensive (loss) income	(190)		4
Total ImmunityBio stockholders’ deficit							Total ImmunityBio stockholders’ deficit	(426,699)		(242,173)
Noncontrolling interests							Noncontrolling interests	(2,382)		(1,740)
Total stockholders’ deficit							Total stockholders’ deficit	(429,081)		(243,913)
Total liabilities and stockholders’ deficit							Total liabilities and stockholders’ deficit	$	352,943	$	468,910

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue	$	8		$	12		$	33		$	30
Operating expenses:
Research and development		11,069			8,364			30,023			19,708
Selling, general and administrative		13,381			24,423			43,736			79,678
Total operating expenses		24,450			32,787			73,759			99,386
Loss from operations		(24,442	)		(32,775	)		(73,726	)		(99,356	)
Other income:
Investment income, net		680			795			2,140			2,302
Interest expense		(393	)		(29	)		(584	)		(29	)
Other income (expense), net		87			60			(87	)		89
Total other income		374			826			1,469			2,362
Loss before income taxes		(24,068	)		(31,949	)		(72,257	)		(96,994	)
Income tax benefit		(99	)		(52	)		(321	)		(423	)
Net loss	$	(23,969	)	$	(31,897	)	$	(71,936	)	$	(96,571	)

Net loss per share:
Basic and diluted	$	(0.30	)	$	(0.39	)	$	(0.89	)	$	(1.18	)

Weighted average number of shares during the period:
Basic and diluted		79,440,591			82,154,219			80,996,732			82,019,203


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue	$	118	$	66	$	167	$	544
Operating expenses:
Research and development (including amounts with related parties)	71,612		49,277		190,072		144,205
Selling, general and administrative (including amounts with related parties)	19,310		29,625		76,493		107,345

Total operating expenses	90,922		78,902		266,565		251,550
Loss from operations	(90,804)		(78,836)		(266,398)		(251,006)
Other expense, net:
Interest and investment income (loss), net	857		(5,941)		723		2,826
Interest expense (including amounts with related parties)	(16,764)		(3,614)		(34,953)		(10,359)
Loss on equity method investment	(4,456)		—		(8,553)		—
Other income (expense), net (including amounts with related parties)	6		(38)		187		252
Total other expense, net	(20,357)		(9,593)		(42,596)		(7,281)
Loss before income taxes and noncontrolling interests	(111,161)		(88,429)		(308,994)		(258,287)
Income tax expense	—		—		—		(8)
Net loss	(111,161)		(88,429)		(308,994)		(258,295)
Net loss attributable to noncontrolling interests, net of tax	(223)		(800)		(642)		(2,764)
Net loss attributable to ImmunityBio common stockholders	$	(110,938)	$	(87,629)	$	(308,352)	$	(255,531)

Net loss per ImmunityBio common share – basic and diluted	$	(0.28)	$	(0.22)	$	(0.77)	$	(0.66)

Weighted-average number of common shares used in computing net loss per share – basic and diluted	400,059,707		391,853,623		398,652,562		386,606,200

☒
þ			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐
¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

									Accumulated
						Additional			Other
	Common					Paid-in			Comprehensive			Accumulated
	Shares			Amount		Capital			Income (Loss)			Deficit			Total
Balance at December 31, 2016		81,983,937		$	8	$	680,757		$	(284	)	$	(387,063	)	$	293,418
Exercise of stock options		614,136			—		1,154			—			—			1,154
Stock-based compensation expense		—			—		28,113			—			—			28,113
Vesting of restricted stock units		35,793			—		—			—			—			—
Exercise of warrants		32,787			—		38			—			—			38
Employee payroll taxes withheld related to option exercises and vesting of restricted stock units		(153,744	)		—		(709	)		—			—			(709	)
Repurchase of common stock		(3,072,209	)		—		—			—			(12,456	)		(12,456	)
Other comprehensive income, net		—			—		—			82			—			82
Net loss		—			—		—			—			(71,936	)		(71,936	)
Balance at September 30, 2017		79,440,700		$	8	$	709,353		$	(202	)	$	(471,455	)	$	237,704


	Nine Months Ended September 30, 2022
	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Total ImmunityBio Stockholders’ Deficit		Noncontrolling Interests		Total Stockholders’ Deficit
	Shares	Amount
Balance as of December 31, 2021	397,830,044	$	40	$	1,719,704	$	(1,961,921)	$	4	$	(242,173)	$	(1,740)	$	(243,913)
Stock-based compensation expense	—	—		10,024		—		—		10,024		—		10,024
Exercise of stock options	14,767	—		74		—		—		74		—		74
Vesting of restricted stock units (RSUs)	177,783	—		—		—		—		—		—		—
Net share settlement for RSUs vesting	(65,832)	—		(372)		—		—		(372)		—		(372)
Other comprehensive (loss) income, net of tax	—	—		—		—		(371)		(371)		—		(371)
Net loss	—	—		—		(102,826)		—		(102,826)		(172)		(102,998)
Balance, March 31, 2022	397,956,762	40		1,729,430		(2,064,747)		(367)		(335,644)		(1,912)		(337,556)
Stock-based compensation expense	—	—		10,175		—		—		10,175		—		10,175
Exercise of stock options	—	—		—		—		—		—		—		—
Vesting of RSUs	116,608	—		—		—		—		—		—		—
Net share settlement for RSUs vesting	(3,604)	—		(15)		—		—		(15)		—		(15)
Other comprehensive (loss) income, net of tax	—	—		—		—		257		257		—		257
Net loss	—	—		—		(94,588)		—		(94,588)		(247)		(94,835)
Balance as of June 30, 2022	398,069,766	40		1,739,590		(2,159,335)		(110)		(419,815)		(2,159)		(421,974)
Stock-based compensation expense	—	—		10,630		—		—		10,630		—		10,630
Exercise of stock options	—	—		—		—		—		—		—		—
Vesting of RSUs	7,800	—		—		—		—		—		—		—
Net share settlement for RSUs vesting	(2,756)	—		(10)		—		—		(10)		—		(10)
Shares issued pursuant to litigation settlement	2,229,296	—		10,656		—		—		10,656		—		10,656
Gain on extinguishment of debt with related parties under common control	—	—		82,858		—		—		82,858		—		82,858
Other comprehensive (loss) income, net of tax	—	—		—		—		(80)		(80)		—		(80)
Net loss	—	—		—		(110,938)		—		(110,938)		(223)		(111,161)
Balance as of September 30, 2022	400,304,106	$	40	$	1,843,724	$	(2,270,273)	$	(190)	$	(426,699)	$	(2,382)	$	(429,081)

	As of September 30,
	2017		2016
Outstanding options		5,693,250		6,518,062
Outstanding restricted stock units		1,066,993		859,022
Outstanding warrants		17,735,527		17,775,257
Total		24,495,770		25,152,341


	September 30, 2022
	(Unaudited)
	Weighted- Average Remaining Contractual Life (in years)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Current:


Mutual funds		$	34	$	9	$	(7)	$	36

Noncurrent:
Foreign bonds	4.8	898		—		(87)		811

Total		$	932	$	9	$	(94)	$	847


	December 31, 2021
	Weighted- Average Remaining Contractual Life (in years)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value

Current:
Corporate debt securities	0.5	$	129,190	$	10	$	(36)	$	129,164
Foreign bonds	0.4	116		—		(1)		115
Mutual funds		35		3		—		38
Current portion		129,341		13		(37)		129,317
Noncurrent:
Foreign bonds	5.0	719		103		—		822
Noncurrent portion		719		103		—		822
Total		$	130,060	$	116	$	(37)	$	130,139


	September 30, 2022
	(Unaudited)
	Less than 12 months				More than 12 months
	Estimated Fair Value		Gross Unrealized Losses		Estimated Fair Value		Gross Unrealized Losses


Mutual funds	$	—	$	—	$	35	$	(7)
Foreign bonds	—		—		811		(87)
Total	$	—	$	—	$	846	$	(94)

	September 30, 2017
	(unaudited)
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Current:
Commercial paper	$	5,145	$	1	$	—		$	5,146
Corporate debt securities		93,609		19		(58	)		93,570
Government sponsored securities		24,263		—		(28	)		24,235
Foreign government bonds		8,402		—		(6	)		8,396
Current portion		131,419		20		(92	)		131,347
Noncurrent:
Corporate debt securities		31,540		25		(109	)		31,456
Government sponsored securities		2,761		—		(19	)		2,742
Noncurrent portion		34,301		25		(128	)		34,198
Total	$	165,720	$	45	$	(220	)	$	165,545

	Fair Value Measurements at September 30, 2017
	(unaudited)
	Total		Level 1		Level 2		Level 3
Assets:
Current:
Commercial paper	$	5,146	$	—	$	5,146	$	—
Corporate debt securities		93,570		—		93,570		—
Government sponsored securities		24,235		—		24,235		—
Foreign government bonds		8,396		—		8,396		—
Noncurrent:
Corporate debt securities		31,456		—		31,456		—
Government sponsored securities		2,742		—		2,742		—
Total assets measured at fair value	$	165,545	$	—	$	165,545	$	—

	September 30, 2017			December 31, 2016
	(Unaudited)							September 30, 2022		December 31, 2021
								(Unaudited)

Leasehold improvements							Leasehold improvements	$	68,490	$	62,482
Equipment							Equipment	66,239		54,284
Construction in progress	$	41,025		$	6,939		Construction in progress	56,829		16,575
Buildings		23,811			4,348
Equipment		9,104			5,458
Leasehold improvements		2,494			2,367
Furniture & fixtures							Furniture & fixtures	1,827		1,052
Software		1,082			769		Software	1,658		1,544
Furniture & fixtures		233			203
		77,749			20,084
Accumulated depreciation		(3,278	)		(1,178	)
	$	74,471		$	18,906
Gross property, plant and equipment							Gross property, plant and equipment	195,043		135,937
Less: Accumulated depreciation and amortization							Less: Accumulated depreciation and amortization	64,602		53,074
Property, plant and equipment, net							Property, plant and equipment, net	$	130,441	$	82,863


										Fair Value Measurements at December 31, 2021
	Fair Value Measurements at December 31, 2016									Total			Level 1		Level 2		Level 3
	Total		Level 1		Level 2		Level 3
Assets:									Assets:
Current:									Current:
Cash and cash equivalents*	$	2,005	$	—	$	2,005	$	—
Cash and cash equivalents									Cash and cash equivalents	$	181,101	(1)	$	51,421	$	129,680	$	—
Equity securities									Equity securities	6,698			6,698		—		—
Corporate debt securities		163,564		—		163,564		—	Corporate debt securities	129,164			—		129,164		—
Government sponsored securities		22,272		—		22,272		—
Foreign government bonds		5,002		—		5,002		—
Foreign bonds									Foreign bonds	115			115		—		—
Mutual funds									Mutual funds	38			38		—		—
Noncurrent:									Noncurrent:
Corporate debt securities		69,195		—		69,195		—
Government sponsored securities		16,982		—		16,982
Foreign government bonds		1,394		—		1,394		—
Foreign bonds									Foreign bonds	822			822		—		—
Total assets measured at fair value	$	280,414	$	—	$	280,414	$	—	Total assets measured at fair value	$	317,938		$	59,094	$	258,844	$	—


(1)			Amounts shown as a Level 2 measurement as of December 31, 2021 include government-sponsored securities of $75.0 million, corporate debt securities of $54.2 million, and commercial paper of $0.5 million with original maturities of less than 90 days.


Construction in progress	$	10,043
Leasehold improvements	6,253
Definite-lived intangible assets (1)	21,229
Other depreciable assets and prepaid expenses	2,983
Total consideration	$	40,508


		September 30, 2022		December 31, 2021
	Classification	(Unaudited)

Assets
Operating lease assets	Operating lease right-of-use assets	$	46,429	$	36,304
Finance lease assets	Other assets	154		—
Total lease assets		$	46,583	$	36,304

Liabilities
Current
Operating lease liabilities	Operating lease liabilities	$	1,365	$	3,011
Finance lease liabilities	Accrued expenses and other liabilities	75		—
Non-current
Operating lease liabilities	Operating lease liabilities, less current portion	49,561		37,068
Finance lease liabilities	Other liabilities	84		—
Total lease liabilities		$	51,085	$	40,079


Years ending December 31:	Operating Leases		Finance Leases		Total

2022 (excluding the nine months ended September 30, 2022)	$	2,632	$	22	$	2,654
2023	9,534		88		9,622
2024	12,112		66		12,178
2025	12,151		—		12,151
2026	10,289		—		10,289
Thereafter	31,457		—		31,457
Total future minimum lease payments	78,175		176		78,351
Less: Interest	23,362		17		23,379
Less: Tenant improvement allowance receivable	3,887		—		3,887
Present value of operating lease liabilities	$	50,926	$	159	$	51,085


	Balances at September 30, 2022
	(Unaudited)
	Maturity Year	Interest Rate	Outstanding Advances		Accrued Interest Added to Note		Less: Unamortized Discounts		Total

Related-Party Notes:
Nant Capital (1)	2023	Term SOFR + 8.0%	$	300,000	$	—	$	43,135	$	256,865
Nant Capital (1)	2023	Term SOFR + 8.0%	125,000		—		8,572		116,428
Total related-party notes			425,000		—		51,707		373,293

Related-Party Convertible Notes:
Nant Capital	2025	5.0%	55,226		8,398		5,673		57,951
Nant Capital	2025	6.0%	50,000		6,189		4,463		51,726
Nant Capital	2025	6.0%	40,000		—		2,778		37,222
NantMobile, LLC	2025	3.0%	55,000		4,668		6,485		53,183
NantWorks	2025	5.0%	43,418		12,654		4,995		51,077
NantCancerStemCell, LLC	2025	5.0%	33,000		7,181		3,579		36,602
Total related-party convertible notes			276,644		39,090		27,973		287,761

Total related-party debt			$	701,644	$	39,090	$	79,680	$	661,054


(1)			The interest rate on our related-party variable-rate notes as of September 30, 2022 was 11.55%.


	Balances at December 31, 2021
	Maturity Year	Interest Rate	Outstanding Advances		Accrued Interest Added to Note		Less: Unamortized Debt Issuance Costs		Total

Related-Party Note:
Nant Capital (1)	2022	Term SOFR + 5.4%	$	300,000	$	674	$	1,438	$	299,236

Related-Party Convertible Notes:
Nant Capital	2025	5.0%	55,226		6,141		—		61,367
Nant Capital	2025	6.0%	50,000		3,810		—		53,810
Nant Capital	2025	6.0%	40,000		—		—		40,000
NantMobile	2025	3.0%	55,000		3,359		—		58,359
NantWorks	2025	5.0%	43,418		10,649		—		54,067
NCSC	2025	5.0%	33,000		5,746		—		38,746
Total related-party convertible notes			276,644		29,705		—		306,349

Total related-party debt			$	576,644	$	30,379	$	1,438	$	605,585


	Principal Payments				Interest Payments (1)
	Convertible Notes		Non-convertible Notes		Convertible Notes		Non-convertible Notes		Total

2022 (excluding the nine months ended September 30, 2022)	$	—	$	—	$	605	$	12,376	$	12,981
2023	—		425,000		2,400		49,101		476,501
2024	—		—		2,407		—		2,407
2025	276,644		—		82,267		—		358,911
Total principal and estimated interest due on related-party debt	$	276,644	$	425,000	$	87,679	$	61,477	$	850,800


	Number of Options	Weighted- Average Exercise Price		Aggregate Intrinsic Value (in thousands)		Weighted- Average Remaining Contractual Life (in years)

Outstanding at December 31, 2021	4,124,930	$	15.62	$	4,178	5.3
Granted	5,736,256	$	5.33
Exercised	(14,767)	$	5.07
Forfeited/expired	(506,242)	$	5.95
Outstanding at September 30, 2022	9,340,177	$	9.84	$	4,655	7.4
Vested and exercisable at September 30, 2022	3,463,222	$	14.70	$	2,650	4.0

	Number of Shares			Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Life (in years)
Outstanding at December 31, 2016		6,307,386		$	7.14	$	19,100		6.4
Options exercised		(614,136	)	$	1.88
Outstanding at September 30, 2017		5,693,250		$	7.71	$	16,076		5.5
Vested and Exercisable at September 30, 2017		4,998,937		$	8.47	$	13,173		6.1

	Number of Restricted Stock Units Outstanding			Weighted-Average Grant Date Fair Value
Unvested balance at December 31, 2016		814,456		$	13.98
Granted		563,483		$	4.53
Vested		(35,793	)	$	8.21
Forfeited		(275,153	)	$	10.51
Unvested balance at September 30, 2017		1,066,993		$	10.08


	Nine Months Ended
	September 30, 2022
	(Unaudited)

Expected term	5.7 years
Risk-free interest rate	2.6		%
Expected volatility	101.8		%
Dividend yield	0.0		%
Weighted-average grant date fair value	$	4.20


	Number of Units	Weighted- Average Grant Date Fair Value

Nonvested balance at December 31, 2021	6,515,889	$	21.88
Granted	1,663,769	$	4.14
Vested	(302,191)	$	11.48
Forfeited/canceled	(928,940)	$	17.77
Nonvested balance at September 30, 2022	6,948,527	$	18.63

~~Outstanding at December 31, 2016~~	~~17,768,314~~
~~Warrants exercised~~	~~(32,787~~	)
~~Outstanding at September 30, 2017~~	~~17,735,527~~
~~Vested and exercisable at September 30, 2017~~	~~15,884,027~~


	Three Months Ended September 30,				$ Change		% Change
	2022		2021
	(Unaudited, $ in thousands)

Revenue	$	118	$	66	$	52	79	%
Operating expenses:
Research and development (including amounts with related parties)	71,612		49,277		22,335		45	%
Selling, general and administrative (including amounts with related parties)	19,310		29,625		(10,315)		(35	%)

Total operating expenses	90,922		78,902		12,020		15	%
Loss from operations	(90,804)		(78,836)		(11,968)		15	%
Other expense, net:
Interest and investment income (loss), net	857		(5,941)		6,798		(114	%)
Interest expense (including amounts with related parties)	(16,764)		(3,614)		(13,150)		364	%
Loss on equity method investment	(4,456)		—		(4,456)		N/A
Other income (loss), net (including amounts with related parties)	6		(38)		44		(116	%)
Total other expense, net	(20,357)		(9,593)		(10,764)		112	%
Loss before income taxes and noncontrolling interests	(111,161)		(88,429)		(22,732)		26	%
Income tax expense	—		—		—		N/A
Net loss	$	(111,161)	$	(88,429)	$	(22,732)	26	%

	Three Months Ended September 30,						Period-to-
	2017			2016			Period Change
	(unaudited, in thousands)
Revenue	$	8		$	12		$	(4	)
Operating expenses:
Research and development		11,069			8,364			2,705
Selling, general and administrative		13,381			24,423			(11,042	)
Total operating expenses		24,450			32,787			(8,337	)
Loss from operations		(24,442	)		(32,775	)		8,333
Other income:
Investment income, net		680			795			(115	)
Interest expense		(393	)		(29	)		(364	)
Other income, net		87			60			27
Total other income		374			826			(452	)
Loss before income taxes		(24,068	)		(31,949	)		7,881
Income tax benefit		(99	)		(52	)		(47	)
Net loss	$	(23,969	)	$	(31,897	)	$	7,928

	~~NANTKWEST, INC.~~
						IMMUNITYBIO, INC.
~~Dated: November 7, 2017~~				~~By:~~		~~/s/ Patrick Soon-Shiong~~ Registrant
					~~Patrick Soon-Shiong~~
Date: November 8, 2022		By:	/s/ Richard Adcock
			Richard Adcock
			Chief Executive Officer ~~and Chairman~~
					(Principal Executive Officer)

Date: November 8, 2022		By:	~~By:~~		/s/ ~~Richard J. Tajak~~ David C. Sachs
					~~Richard J. Tajak~~ David C. Sachs
					~~Interim~~ Chief Financial Officer
					(Principal Financial Officer)