Scilex Holding Company — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing reports annual results; it does not provide a clear standalone fourth-quarter income statement or cash-flow value. Scilex is a revenue-generating pain-management company. ZTlido and ELYXYB were commercialized during 2023; GLOPERBA was approved and planned for launch in the first half of 2024. The pipeline includes SEMDEXA (SP-102), SP-103 and SP-104.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Net revenue | $46.7 million | $38.0 million |
| Cost of revenue | $15.7 million | $10.8 million |
| Gross profit and approximate gross margin | $31.1 million; 66.5% | $27.2 million; 71.6% |
| Research and development | $12.7 million | $9.1 million |
| Selling, general and administrative | $119.6 million | $64.9 million |
| Operating loss | $105.4 million | $50.6 million |
| Net loss | $114.3 million | $23.4 million |
| Basic and diluted loss per share | $1.28 | $0.17 |
| Cash used in operating activities | $20.7 million | $21.3 million |
Revenue grew approximately 23%. Management attributed the increase to ZTlido gross sales growth of approximately 55% and ELYXYB sales following its April 2023 launch, partly offset by higher rebates. Gross margin declined as cost of revenue grew faster than net revenue, including increased royalties. The net loss widened substantially, mainly alongside a $54.7 million increase in SG&A; the 2022 comparison also included a $28.6 million gain on debt extinguishment.
SG&A rose to $119.6 million, with increases including advisory, personnel, legal, contracted services and marketing costs. R&D increased to $12.7 million, reflecting SP-104 planning and development work for GLOPERBA and ELYXYB. The filing reports no formal financial guidance.
Year-end liquidity: Cash and cash equivalents were $3.9 million (plus $0.8 million restricted cash). Current assets were $46.8 million against current liabilities of $250.4 million, or negative working capital of $203.6 million. Accumulated deficit was $490.2 million. The auditor’s report includes a going-concern paragraph, and management concluded substantial doubt exists about the company’s ability to continue as a going concern for one year after issuance of the financial statements.
Debt and financing: Reported total indebtedness was $128.9 million, including $104.1 million carrying value of the Oramed Note, $4.3 million of Convertible Debentures, $17.0 million under the eCapital revolving facility and $3.4 million of deferred GLOPERBA consideration. The Oramed Note had $96.9 million principal outstanding at year-end, matures March 21, 2025, and requires large scheduled principal installments beginning March 2024; it is secured and includes restrictive covenants. The eCapital facility is secured by receivables. Scilex raised funds through debt and equity arrangements during 2023 and had a $170 million ATM program available, with no sales under it by year-end.
Material changes and business developments
- ZTlido prescriptions grew more than 25% year over year, and the company reported approximately 13.5% share of the prescription lidocaine-patch market in territories it covers. ZTlido coverage was reported for more than 200 million U.S. lives.
- ELYXYB was launched in the United States in April 2023; the company also filed a Canadian submission.
- GLOPERBA, an FDA-approved liquid colchicine product, was expected to launch in the first half of 2024. A Takeda patent suit restricts sales under a proposed revised label during a stay that could extend to May 2026; sales under the existing label are not barred by that stay.
- SP-103 completed a Phase 2 low-back-pain trial in 2023. The company reported acceptable safety and tolerability and preliminary findings, and planned a Phase 2/3 chronic-neck-pain trial in 2024. SP-104 Phase 1 studies were completed; a Phase 2 trial was expected in 2024.
- SEMDEXA’s Phase 3 study met reported primary and key secondary endpoints. However, the filing says FDA guidance requires an additional clinical study to collect safety data before an NDA submission.
- In September 2023, Scilex repurchased securities from Sorrento and issued the secured Oramed Note as part of the transaction. Sorrento was in Chapter 11 but was no longer Scilex’s majority voting holder at year-end. Scilex’s $3.2 million receivable from Sorrento was fully reserved.
Outlook, risks and unusual items
- Management expects continued losses and significant spending on commercialization, clinical development and public-company operations. Future funding depends on product sales and the ability to raise capital; the company warns it may have to reduce commercialization or delay, scale back or stop development if funding is inadequate.
- Key supply exposure: Genzyme notified Scilex that it intends to terminate sodium-hyaluronate supply for SEMDEXA effective May 31, 2024. Scilex was seeking and qualifying an alternative supplier. Lifecore’s prior SEMDEXA services agreement expired in 2022, and a new agreement was being negotiated.
- Oishi and Itochu supply and license rights are critical to ZTlido and SP-103. They may have termination rights if product net profits remain at or below 5% of net sales for four or more consecutive quarters; the filing says the relevant profits had not exceeded that threshold and the rights had not been exercised.
- Legal matters include ZTlido generic-patent litigation, with trial scheduled for July 2024; the GLOPERBA label-patent case; and continuing litigation against a former employee. A February 2024 settlement with Virpax provides for $3.5 million and $2.5 million payments, plus contingent royalties, while claims against the former employee remain ongoing. Separate OTC-patch litigation was settled in January and February 2024 on confidential terms.
- Contingent consideration includes up to $280 million tied to SEMDEXA regulatory and sales milestones, plus obligations related to GLOPERBA and SP-104; the filing states relevant milestones had not been triggered. These amounts could materially affect future cash needs if achieved.
- In February 2024, Scilex disclosed an underwritten offering of 5.9 million shares with accompanying warrants, with an underwriters’ option for additional securities. This subsequent event creates potential dilution; verify final proceeds and securities issued.
- Management reported that previously identified material weaknesses in internal control over financial reporting were remediated as of December 31, 2023, and concluded controls were effective. The auditor did not provide an ICFR attestation.
Important facts for investors to verify
- Cash runway, near-term financing needs and the ability to meet the Oramed Note installments and other debt obligations.
- ZTlido sales, net pricing, rebates, royalty burden and whether the Oishi/Itochu termination conditions remain a concern.
- ELYXYB’s commercial uptake and GLOPERBA launch timing, access and sales under its current label amid the Takeda litigation.
- The FDA’s additional SEMDEXA safety-study requirements, timing and cost, and whether a replacement sodium-hyaluronate supplier is secured before Genzyme’s termination.
- Progress, cost and results of planned SP-103 and SP-104 clinical trials, and whether management can fund these programs.
- Final terms and proceeds of the February 2024 offering, subsequent share-count changes, and potential dilution from outstanding warrants, options and financing facilities.
- Developments in the ZTlido and GLOPERBA patent cases, claims against the former employee, and receipt of the Virpax settlement payments.