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On Friday, Boral (OTC:BOALY) Capital shifted its stance on Scilex Holding Co. (NASDAQ: SCLX), downgrading the stock rating from Buy to Hold. The decision follows Scilex's announcement of a 1-for-35 reverse stock split, set to take effect on April 15, 2025. The downgrade comes amid challenging market conditions, with InvestingPro data showing the stock has declined over 80% in the past year, with particularly steep drops of 68% in the last six months. This move is aimed at bringing the company into compliance with Nasdaq's minimum bid price requirement. Analysts at Boral Capital have decided to adopt a wait-and-see approach until the effects of the reverse split on the company's valuation and capital structure are clearer.
The reverse stock split will consolidate approximately 243 million outstanding shares of Scilex into about 6.9 million shares. In lieu of issuing fractional shares, Scilex will compensate shareholders with a cash payment reflecting the market value of any fractional shares owned, based on the market close on April 14, 2025. Adjustments will also be applied to Scilex's convertible securities, which include warrants, preferred stock, convertible notes, and stock options.
Despite the reverse stock split, the total number of authorized shares for Scilex will remain unchanged. The company is actively continuing to work towards its broader business goals, supported by strong revenue growth of 21% in the last twelve months and a healthy gross profit margin of 70.5%. These include the advancement of its commercial offerings and the development of its product pipeline. According to InvestingPro analysis, while the company isn't currently profitable, analysts expect positive earnings in the coming year. Scilex is particularly focused on a proposed joint venture with IPMC that will target neurodegenerative and cardiometabolic diseases.
The reverse stock split is a strategic step for Scilex as it seeks to maintain its listing on the Nasdaq exchange. By reducing the number of shares available, the company aims to increase the per-share price to meet the exchange's requirements. This approach is often employed by companies facing the possibility of delisting due to shares trading below a certain threshold.
Scilex's forthcoming joint venture with IPMC represents a significant move into the neurodegenerative and cardiometabolic disease sectors. These efforts demonstrate the company's commitment to expanding its reach and impact within the pharmaceutical industry. With analyst price targets ranging from $6.25 to $18, and the stock currently trading below its InvestingPro Fair Value, investors seeking detailed analysis can access over 30 additional financial metrics and insights through InvestingPro's comprehensive platform.
In other recent news, Scilex Holding Company has announced a 1-for-35 reverse stock split of its common stock, effective April 15, 2025. This move is intended to comply with Nasdaq's minimum bid price requirement, reducing the company's outstanding shares from approximately 243 million to about 6.9 million. Additionally, Scilex voluntarily terminated its Sales Agreement with B. Riley Securities Inc., Cantor Fitzgerald & Co., and H.C. Wainwright & Co., LLC, which had allowed the sale of roughly 2.76 million shares, garnering gross proceeds of $2.69 million. The company has not disclosed the reasons for ending this agreement.
Furthermore, the U.S. Bankruptcy Court approved an extension of the lock-up period for Scilex's Dividend Stock to April 14, 2025, affecting shares previously distributed by Sorrento Therapeutics (OTC:SRNE). On the analyst front, Boral Capital initiated coverage on Scilex with a Buy rating and a price target of $22, highlighting the potential of its diverse non-opioid pain management portfolio. Scilex also reported that the FDA has acknowledged the receipt of its Supplemental New Drug Application for ELYXYB, aimed at treating acute pain. This acknowledgment signifies the beginning of a review process, though it does not guarantee approval.
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