ORMP

Business Context and Reporting Period

Company: Oramed Pharmaceuticals Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 7, 2023 (Events reported through August 9, 2023)
Context: The Company entered into a Material Definitive Agreement to acquire securities of Scilex Holding Company ("Scilex") from Sorrento Therapeutics, Inc. ("Seller"), which is currently in Chapter 11 bankruptcy proceedings. The transaction is subject to Bankruptcy Court approval and an auction process.

Key Financial Metrics and Transaction Terms

Transaction Value: $105,000,000 total purchase price for the acquisition of Scilex securities (excluding potential future Option Shares).
Consideration Structure:

• Credit bid of the full amount of outstanding obligations under the Replacement DIP Facility (dollar-for-dollar).
• Remaining balance paid in cash.

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 (1,386,617 public + 3,104,000 private).

Replacement DIP Facility:

• Principal Amount: $100,000,000.
• Interest Rate: 15% per annum (cash interest); Default rate adds 3%.
• Use of Proceeds: Refinance existing $82,000,000 DIP facility, working capital, and bankruptcy-related fees.
• Maturity: Earliest of October 15, 2023, or consummation of the sale.

Financial Statements: This filing does not provide revenue, profit, cash flow, or margin data for Oramed Pharmaceuticals Inc.

Material Changes and Agreements

The primary material change is the entry into the Stock Purchase Agreement and the Replacement DIP Loan Agreement. The Company is acting as a "stalking horse" bidder in a Bankruptcy Court-supervised auction. The transaction involves acquiring a controlling interest in Scilex, pending the satisfaction of closing conditions including regulatory approvals and the absence of a Material Adverse Effect.

Guidance, Risks, and Contingencies

Transaction Risks:

• Competitive Bidding: The transaction is subject to higher or better offers at an auction; the Company may need to increase the purchase price.
• Closing Conditions: Completion requires Bankruptcy Court approval, antitrust clearance (HSR Act), and no Material Adverse Effect.
• Termination: The agreement is terminable if the auction does not commence by August 14, 2023, or if the sale order is not entered by August 17, 2023. It also terminates automatically if the Seller enters an alternative transaction.
• Termination Fee: Seller must pay $3,412,500 plus up to $1,000,000 in legal expenses if the agreement is terminated under certain circumstances and an alternative transaction is consummated.

Forward-Looking Statements: The filing contains forward-looking statements regarding the anticipated benefits of the transaction, which are subject to significant risks and uncertainties, including the outcome of the Chapter 11 process and the ability to recover proceeds under the DIP facility.

Investor Verification Checklist

• Verify the status of the Bankruptcy Court auction scheduled to commence by August 14, 2023.
• Confirm whether the Bankruptcy Court has entered the order approving the sale of the Purchased Securities by August 21, 2023.
• Monitor for any competing bids that may exceed the $105,000,000 purchase price.
• Review the full text of the Stock Purchase Agreement (Exhibit 2.1) and Replacement DIP Loan Agreement (Exhibit 10.1) for detailed covenants and representations.
• Assess the impact of the $100,000,000 DIP facility on the Company's liquidity and balance sheet.