PALO ALTO, CA – Scilex Holding Co (SCLX), a biopharmaceutical company with a market capitalization of $90.5 million and annual revenue of $50.8 million, has reached agreements that will lead to the sale of a significant portion of its stock to satisfy debt payments.
According to InvestingPro data, the company's short-term obligations currently exceed its liquid assets, highlighting the urgency of this financial restructuring. The company entered into consent letters with Oramed Pharmaceuticals Inc (NASDAQ:ORMP). and other note holders on Monday, December 9, 2024, which outline the transfer and sale of up to 60,068,585 shares of Scilex common stock.
The agreement, as detailed in the SEC Form 8-K filed today, permits Scilex Joint Venture (JV) to transfer these shares to a designated broker and subsequently sell them at its discretion. The proceeds from these sales are earmarked to cover scheduled principal installments that Scilex owes to Oramed and other note holders, as per previous loan agreements.
Financial metrics from InvestingPro show the company carries a total debt of $107 million, with a concerning current ratio of 0.2, indicating potential liquidity challenges. Specifically, Scilex is required to make payments on a senior secured promissory note dated September 21, 2023, and on senior secured convertible notes dated October 8, 2024.
The sales of shares are to adhere to a specified order of payments, with the first payment of $13,239,205 due to Oramed on December 21, 2024, to cover the principal payment under the senior secured promissory note. Subsequent payments are scheduled for January 2, 2025, and will continue until the outstanding principal and accrued interest are fully paid.
In addition to the sales proceeds used to cover the debt payments, Scilex JV has also agreed to pay a sales commission of 2.5% of the gross proceeds from the sale of each share to the designated broker.
As part of the agreement to secure the timely payment and discharge of all obligations, Scilex JV has granted a security interest in the proceeds from the sale of the shares to Acquiom Agency Services LLC, which will act as an agent.
The consent letters and the details of the agreement have been filed with the SEC and are incorporated by reference into the Form 8-K. This strategic move by Scilex Holding Co is intended to manage its debt obligations effectively and maintain financial stability.
The company's common stock and warrants are listed on The Nasdaq Stock Market under the ticker symbols SCLX and SCLXW, respectively. Despite challenging debt metrics, the company maintains a healthy gross profit margin of 68.24%.
InvestingPro subscribers have access to over 30 additional financial metrics and exclusive analysis that could help evaluate Scilex's financial health and investment potential. This report is based on a press release statement.
In other recent news, Scilex Holding Company has made several significant announcements. The biopharmaceutical company reported Q3 net sales growth for its non-opioid pain management products, with ZTlido sales reaching between $11.0 million and $13.0 million.
The company also secured a $50 million convertible note offering with stakeholders including Murchinson, 3i (LON:III) LP, and Oramed Pharmaceuticals, a move that H.C. Wainwright applauded as it maintained its Buy rating on Scilex.
Scilex has also successfully negotiated waivers for potential defaults on its financial obligations, preventing immediate acceleration of payment obligations under the senior secured promissory note and the Tranche B notes. In addition, Scilex announced the appointment of BPM LLP as its new independent registered public accounting firm, a decision made by the Audit Committee of the Board of Directors.
Furthermore, Scilex is exploring strategic options for its subsidiary, Scilex Pharmaceuticals, potentially considering a spinoff or public listing outside the United States. The company also announced the resignation of David Lemus from its Board of Directors for personal and professional reasons, leaving a vacancy yet to be filled. These are the most recent developments at Scilex Holding Company.
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