Business Context and Reporting Period
Company: Oramed Pharmaceuticals Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 4, 2023
Event: Entry into a non-binding term sheet to acquire securities of Scilex Holding Company ("Scilex") from Sorrento Therapeutics, Inc. ("Seller"), which is currently in Chapter 11 bankruptcy proceedings.
Key Financial Metrics and Transaction Terms
This filing details a proposed transaction rather than standard periodic financial results. Key financial terms include:
- Total Purchase Price: $105,000,000 (excluding potential future payments for Option Shares).
- Consideration Structure: A credit bid of the full amount of outstanding obligations under a new Replacement DIP Facility, with the remaining balance paid in cash.
- Replacement DIP Facility: A proposed non-amortizing super-priority debtor-in-possession term loan of $100 million to refinance existing obligations of approximately $82 million and provide working capital.
- Exit Financing: Contemplated senior secured convertible debt and/or additional securities of approximately $115 million for the Seller's post-emergence business.
- Break-up Fee: $3,412,500 if the Company is designated as the "stalking horse" bidder and certain conditions are met.
- Expense Reimbursement: Up to $1,000,000 for outside counsel costs.
Material Changes and Transaction Scope
The filing represents a material strategic development involving the potential acquisition of Scilex assets. The transaction scope includes:
- Assets to be Acquired:
- 59,726,737 shares of Scilex common stock.
- Option to purchase up to 2,259,058 additional shares at $1.13 per share.
- 29,057,096 shares of Scilex Series A preferred stock.
- Warrants exercisable for 4,490,617 shares of Scilex common stock (public and private).
- Process: The transaction is subject to a Bankruptcy Court-supervised auction process. The Company intends to act as the "stalking horse" bidder.
- Timeline: Definitive documentation was targeted for execution by August 8, 2023, with a Bankruptcy Court hearing on the DIP Motion scheduled for August 7, 2023.
Guidance, Risks, and Contingencies
Management Commentary and Outlook: The Company has engaged H.C. Wainwright & Co., LLC as exclusive financial advisor. Management intends to negotiate definitive documentation in good faith. However, the filing explicitly states that the Term Sheet is non-binding.
Risks and Contingencies:
- Bankruptcy Court Approval: The transaction requires approval of the sale and the Replacement DIP Facility by the United States Bankruptcy Court for the Southern District of Texas.
- Competing Bids: The process is subject to higher or better offers from competing bidders at an auction.
- Definitive Agreement: Consummation is contingent upon the negotiation and execution of final definitive documentation.
- Forward-Looking Statements: Actual results may differ materially due to risks including the termination of the Term Sheet, failure to agree on terms, or diversion of management attention.
Investor Verification Checklist
- Verify the outcome of the Bankruptcy Court hearing scheduled for August 7, 2023, regarding the Replacement DIP Facility and stalking horse protections.
- Monitor the auction process for competing bids that may alter the purchase price or terms.
- Confirm the execution of the Definitive Documentation and the specific terms of the credit bid versus cash payment.
- Review the final structure of the Exit Financing ($115 million) and its impact on the post-emergence capital structure of the acquired entity.
- Assess the impact of the transaction on Oramed's liquidity and cash reserves, given the cash portion of the purchase price.