Scilex Holding Company Announces Closing of a $50 Million Registered Convertible Financing

Rhea-AI Summary

Scilex Holding Company (Nasdaq: SCLX) has closed a $50 million registered convertible financing. The company issued new tranche B senior secured convertible notes and warrants to purchase up to 7,500,000 shares of common stock. The notes have a 10% original issue discount, 5.5% annual interest rate, and mature in two years. Scilex received $22.5 million in cash and a $22.5 million reduction in its existing debt with Oramed Pharmaceuticals. The notes are convertible at $1.09 per share, and the warrants have an exercise price of $1.09. Net proceeds of approximately $20.5 million will be used for debt repayment, satisfying certain costs, and working capital. The offering was made under a shelf registration statement and placed by StockBlock Securities and Rodman & Renshaw

Positive

• Raised $50 million through convertible financing
• Received $22.5 million in cash and $22.5 million debt reduction
• Net proceeds of approximately $20.5 million for debt repayment and working capital
• Warrants issued with potential to raise additional capital

Negative

• Dilutive effect on existing shareholders due to convertible notes and warrants
• Increased debt burden with new $50 million in convertible notes
• 10% original issue discount on the notes

Insights

Financial Analyst

This $50 million convertible financing is a significant development for Scilex Holding Company, addressing both immediate financial needs and future growth potential. The deal structure is complex, involving:

• New convertible notes with a 5.5% interest rate
• Warrants for 7.5 million shares at $1.09 per share
• Partial debt reduction of an existing note with Oramed

The $20.5 million in net proceeds will primarily be used for debt repayment, including $12.5 million to Oramed and paying off a revolving credit facility. This debt restructuring should improve the company's balance sheet and reduce interest expenses.

However, the convertible nature of the new notes and the warrants present potential dilution risks for existing shareholders if converted or exercised. The $1.09 conversion price is notably lower than the current stock price, which could put downward pressure on the share value.

While this financing provides short-term stability, investors should closely monitor Scilex's ability to generate revenue growth from its non-opioid pain management products to support long-term sustainability and potential future capital needs.

Legal Expert

This registered direct offering by Scilex Holding Company is structured in compliance with SEC regulations, utilizing a shelf registration statement (File No. 333-276245) that became effective on January 11, 2024. The use of this method allows for a more streamlined offering process compared to a traditional public offering.

Key legal considerations include:

• The convertible notes are senior secured, indicating they have priority claim on company assets
• Conversion and warrant exercise are subject to beneficial ownership limitations, likely to prevent any single investor from gaining too much control
• The prospectus supplement filed with the SEC provides detailed terms and risks associated with the offering

Investors should note that while the offering provides immediate capital, it also creates new obligations for Scilex. The company must now comply with the terms of the convertible notes, including interest payments and potential conversion requests. Additionally, the warrants represent a long-term (5-year) potential dilution factor.

From a governance perspective, this financing alters the company's capital structure and could impact future strategic decisions. Shareholders should review the full prospectus to understand all implications of this complex transaction.

PALO ALTO, Calif., Oct. 08, 2024 (GLOBE NEWSWIRE) -- Scilex Holding Company (Nasdaq: SCLX, “Scilex” or the “Company”), an innovative revenue-generating company focused on acquiring, developing and commercializing non-opioid pain management products for the treatment of acute and chronic pain, today announced the closing of its previously announced registered direct offering of new tranche B senior secured convertible notes (the “Notes”) in the aggregate principal amount of $50 million and warrants to purchase up to 7,500,000 shares of the Company’s common stock.

The Notes have an original issue discount of 10.0% and bear interest at a rate of 5.5% per annum and unless earlier converted or redeemed, the Notes mature on the two-year anniversary of the issuance date. The Company has received in exchange for the issuance of the Notes to 3i LP and the affiliates of Murchinson an aggregate amount in cash equal to $22,500,000, excluding fees and expenses payable by the Company. The Company has received from Oramed Pharmaceuticals Inc. in consideration for the Note issued to Oramed an exchange and reduction of the principal balance under the Company’s existing Senior Secured Promissory Note with Oramed (the “Oramed Note”) of $22,500,000. All amounts due under the Notes are convertible at any time, in whole or in part, subject to certain beneficial ownership limitations, at the option of the holder into shares of the Company’s common stock at a conversion price equal to $1.09, subject to adjustment as described in the Notes. The warrants have an exercise price of $1.09 (subject to adjustment as described in the warrants) and will become exercisable immediately upon issuance and will expire on the date that is five years from the issuance date.

StockBlock Securities LLC and its affiliate, Rodman & Renshaw LLC, served as the exclusive placement agents in connection with the offering.

The net proceeds from the offering are approximately $20,500,000, after deducting the placement agents’ fees and other offering expenses payable by the Company. The Company intends to use the net proceeds from the offering for repayment and satisfaction of $12,500,000 of the outstanding balance under the Oramed Note, payoff of the revolving credit facility with eCapital Healthcare Corp, satisfaction of certain costs, fees and expenses of the purchasers of the Notes and the collateral agent, and, to the extent there are any remaining proceeds, for working capital and other general corporate purposes of the Company.

The securities described above were offered by the Company pursuant to a “shelf” registration statement on Form S-3 (File No. 333-276245), as amended, which was originally filed with the Securities and Exchange Commission (the “SEC”) on December 22, 2023, and declared effective by the SEC on January 11, 2024. The securities were offered only by means of a prospectus, including a prospectus supplement, forming a part of the effective registration statement. A prospectus supplement and accompanying prospectus relating to, and describing the terms of, the offering have been filed with the SEC and are available on the SEC’s website at http://www.sec.gov. Electronic copies of the prospectus supplement and accompanying prospectus may also be obtained by contacting Rodman & Renshaw LLC at 600 Lexington Avenue, 32nd Floor, New York, NY 10022, by telephone at (212) 540-4414, or by email at info@rodm.com; and StockBlock Securities LLC at 600 Lexington Avenue, 32nd Floor, New York, NY 10022, by telephone at (212) 540-4440, or by email at info@stockblock.com.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or other jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state or other jurisdiction.

For more information on Scilex Holding Company, refer to www.scilexholding.com

For more information on Semnur Pharmaceuticals, refer to www.semnurpharma.com

For more information on Scilex Holding Company Sustainability Report, refer to www.scilexholding.com/investors/sustainability

For more information on ZTlido® including Full Prescribing Information, refer to www.ztlido.com.

For more information on ELYXYB®, including Full Prescribing Information, refer to www.elyxyb.com.

For more information on GLOPERBA®, including Full Prescribing Information, refer to www.gloperba.com.

https://www.facebook.com/scilex.pharm

https://www.linkedin.com/company/scilex-holding-company/

info@scilexholding.com

About Scilex Holding Company

Scilex Holding Company is an innovative revenue-generating company focused on acquiring, developing and commercializing non-opioid pain management products for the treatment of acute and chronic pain. Scilex targets indications with high unmet needs and large market opportunities with non-opioid therapies for the treatment of patients with acute and chronic pain and is dedicated to advancing and improving patient outcomes. Scilex’s commercial products include: (i) ZTlido® (lidocaine topical system) 1.8%, a prescription lidocaine topical product approved by the U.S. Food and Drug Administration (the “FDA”) for the relief of neuropathic pain associated with postherpetic neuralgia, which is a form of post-shingles nerve pain; (ii) ELYXYB®, a potential first-line treatment and the only FDA-approved, ready-to-use oral solution for the acute treatment of migraine, with or without aura, in adults; and (iii) GLOPERBA®, the first and only liquid oral version of the anti-gout medicine colchicine indicated for the prophylaxis of painful gout flares in adults.

In addition, Scilex has three product candidates: (i) SP-102 (10 mg, dexamethasone sodium phosphate viscous gel) (“SEMDEXA™” or “SP-102”), a novel, viscous gel formulation of a widely used corticosteroid for epidural injections to treat lumbosacral radicular pain, or sciatica, for which Scilex has completed a Phase 3 study and was granted Fast Track status from the FDA in 2017; (ii) SP-103 (lidocaine topical system) 5.4%, (“SP-103”), a next-generation, triple-strength formulation of ZTlido, for the treatment of chronic neck pain and for which Scilex has recently completed a Phase 2 trial in low back pain. SP-103 has been granted Fast Track status from the FDA in low back pain; and (iii) SP-104 (4.5 mg, low-dose naltrexone hydrochloride delayed-release capsules) (“SP-104”), a novel low-dose delayed-release naltrexone hydrochloride being developed for the treatment of fibromyalgia, for which Phase 1 trials were completed in the second quarter of 2022.

Scilex Holding Company is headquartered in Palo Alto, California.

Forward-looking Statements

This press release and any statements made for and during any presentation or meeting concerning the matters discussed in this press release contain forward-looking statements related to Scilex and its subsidiaries under the safe harbor provisions of Section 21E of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Forward-looking statements include statements regarding the new financing, the intended use of net proceeds from the offering, Scilex’s long-term objectives and commercialization plans, future opportunities for Scilex, Scilex’s future business strategies and Scilex’s current and prospective product candidates.

Risks and uncertainties that could cause Scilex’s actual results to differ materially and adversely from those expressed in our forward-looking statements, include, but are not limited to: risks associated with the unpredictability of trading markets; general economic, political and business conditions; the risk that the potential product candidates that Scilex develops may not progress through clinical development or receive required regulatory approvals within expected timelines or at all; risks relating to uncertainty regarding the regulatory pathway for Scilex’s product candidates; the risk that Scilex will be unable to successfully market or gain market acceptance of its product candidates; the risk that Scilex’s product candidates may not be beneficial to patients or successfully commercialized; the risk that Scilex has overestimated the size of the target patient population, their willingness to try new therapies and the willingness of physicians to prescribe these therapies; risks that the outcome of the trials and studies for SP-102, SP-103 or SP-104 may not be successful or reflect positive outcomes; risks that the prior results of the clinical and investigator-initiated trials of SP-102 (SEMDEXA™), SP-103 or SP-104 may not be replicated; regulatory and intellectual property risks; and other risks and uncertainties indicated from time to time and other risks described in Scilex’s most recent periodic reports filed with the Securities and Exchange Commission, including Scilex’s Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent Quarterly Reports on Form 10-Q that the Company has filed or may file, including the risk factors set forth in those filings. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and Scilex undertakes no obligation to update any forward-looking statement in this press release except as may be required by law.

Contacts:

Investors and Media
Scilex Holding Company
960 San Antonio Road
Palo Alto, CA 94303
Office: (650) 516-4310

Email: investorrelations@scilexholding.com

Website: www.scilexholding.com

SEMDEXA™ (SP-102) is a trademark owned by Semnur Pharmaceuticals, Inc., a wholly-owned subsidiary of Scilex Holding Company. A proprietary name review by the FDA is planned.

ZTlido^® is a registered trademark owned by Scilex Pharmaceuticals Inc., a wholly-owned subsidiary of Scilex Holding Company.

GLOPERBA^® is the subject of an exclusive, transferable license to Scilex Holding Company to use the registered trademark.

ELYXYB^® is a registered trademark owned by Scilex Holding Company.

All other trademarks are the property of their respective owners.

© 2024 Scilex Holding Company All Rights Reserved.

FAQ

What is the size of Scilex Holding Company's (SCLX) recent convertible financing?

Scilex Holding Company (SCLX) closed a $50 million registered convertible financing on October 8, 2024.

What are the key terms of SCLX's new convertible notes?

The notes have a 10% original issue discount, 5.5% annual interest rate, mature in two years, and are convertible at $1.09 per share.

How much cash did Scilex (SCLX) receive from this financing?

Scilex (SCLX) received $22.5 million in cash and a $22.5 million reduction in its existing debt with Oramed Pharmaceuticals.

What is the exercise price of the warrants issued by SCLX in this financing?

The warrants issued by SCLX have an exercise price of $1.09 per share and expire five years from the issuance date.