Scilex Holding Co (NASDAQ:SCLX), a biotech firm, has successfully negotiated waivers for potential defaults on its financial obligations, as disclosed in a recent SEC filing. The company's failure to submit its quarterly report on time had put it at risk of default under various agreements with its note holders.
On Thursday, Scilex entered into an agreement with Oramed Pharmaceuticals Inc (NASDAQ:ORMP)., one of its note holders, to waive the default resulting from the delay in filing the third-quarter financial report for the period ending September 30, 2024. The waiver stipulates that Scilex must deliver the pending financial statements by January 20, 2025, and appoint a new independent registered public accounting firm from a list approved by Oramed.
In a similar move, Scilex also obtained consents from other institutional investors, waiving the default related to the same filing delay. The aggregate principal amount of the Tranche B senior secured convertible notes initially stood at $50 million, with approximately $41 million currently remaining after conversions into common stock.
The waivers are significant for Scilex as they prevent immediate acceleration of payment obligations under the senior secured promissory note and the Tranche B notes, which would have been triggered by the filing delay. The remaining principal amount under the Oramed note is approximately $37 million.
Scilex is working to file the overdue quarterly report as soon as possible. The company has also updated its risk factors to reflect the current situation, emphasizing the importance of meeting the new January 2025 deadline to avoid further complications.
In other recent news, Scilex Holding Company has been navigating several significant developments. The company received a non-compliance notice from Nasdaq due to a delay in filing its Q3 report and is now required to submit a plan to regain compliance. Meanwhile, Scilex 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. Furthermore, Scilex is exploring strategic options for its subsidiary, Scilex Pharmaceuticals, potentially considering a spinoff or public listing outside the United States.
In addition, Scilex reached a consensus with the FDA for a New Drug Application for SP-103, a product candidate for chronic neck pain treatment, projected to reach peak annual sales of $1.2 billion by the 6th year after its launch.
InvestingPro Insights
Recent InvestingPro data sheds light on Scilex Holding Co's (NASDAQ:SCLX) financial situation, providing context to the company's recent negotiations with note holders. With a market capitalization of $66.26 million, Scilex's stock has experienced significant volatility, with a 43.17% decline over the past month and a 54.8% drop in the last three months. These figures align with the company's current challenges, including the delayed filing of its quarterly report.
InvestingPro Tips highlight that Scilex's short-term obligations exceed its liquid assets, which underscores the importance of the recently negotiated waivers to avoid default. Additionally, the company is not profitable over the last twelve months, with a negative operating income of $99.14 million for the same period. This financial strain explains Scilex's efforts to maintain flexibility with its creditors.
Despite these challenges, InvestingPro Tips also indicate that Scilex's valuation implies a strong free cash flow yield, which could be a positive sign for investors looking beyond the current turbulence. For those seeking a more comprehensive analysis, InvestingPro offers 7 additional tips that could provide further insights into Scilex's financial health and market position.
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