Sorrento’s sale of Scilex stock to Oramed draws objection from Scilex

By Sarah Lizee

Olympia, Wash., Aug. 25 – Sorrento Therapeutics, Inc.’s proposed sale of its equity interests in Scilex Holding Co. to Oramed Pharmaceuticals, Inc. drew an objection from Scilex, which is also acting as Sorrento’s junior debtor-in-possession lender, according to documents filed Thursday with the U.S. Bankruptcy Court for the Southern District of Texas.

As previously reported, the company has executed a term sheet with Oramed for the sale of substantially all of the debtors’ common stock, preferred stock, and warrants and options for common stock in Scilex for a purchase price of $105 million. Oramed also agreed to provide a $100 million replacement DIP facility.

The deal was subject to the submission of higher or otherwise better offers.

Scilex said that it had submitted an improved bid to purchase the stock for $138 million, with committed funding for the cash portion of the bid and a closing date on or before Sept. 25.

“The finalized funding commitment and truncated closing timeline cure the debtors’ stated concerns about ‘execution risk’ and Scilex’s ability to consummate and close the proposed transaction,” Scilex said in the objection.

“Comparing the terms of the improved Scilex bid to those provided in the Oramed sale order, the improved Scilex bid is an unconditional bid for more cash – approximately $5.6 million higher than the Oramed bid on dollar-for-dollar basis, and after taking the stalking horse protections into account, the improved Scilex bid also includes a better outside closing date.”

Scilex also said that the junior DIP compromise component of Oramed’s bid is “illusory,” as it requires Oramed to waive certain rights under the junior DIP liens that it doesn’t have the authority to waive.

Without the $23 million associated with the junior DIP facility, the Scilex bid is $33 million higher than the Oramed bid, Scilex said.

“Assuming arguendo that Oramed has the authority necessary for the junior DIP compromise, that compromise is still worse for the estates because it characterizes the junior DIP obligations as unsecured claims but does not waive them entirely,” Scilex said.

“The value of the DIP compromise is thus far less than $23 million, unless one assumes that there is a zero dollar recovery for unsecured creditors in these cases.”

For example, a 20% distribution to unsecured creditors would mean that, under the junior DIP compromise, the junior DIP obligations would still receive $4.6 million, reducing the value of that compromise to $18.4 million from $23 million, Scilex said.

Scilex said its bid would waive the junior DIP entirely for the benefit of unsecured creditors.

The biopharmaceutical company is based in San Diego. The company filed bankruptcy on Feb. 13, 2023 under Chapter 11 case number 23-90085.

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