10-K: Scilex Holding Company's 10-K Filing Reveals Strategy for Non-Opioid Pain Management

Scilex Holding Company's 10-K filing highlights its focus on non-opioid pain management through commercialized products and pipeline development.

Summary

• Scilex Holding Company is focused on acquiring, developing, and commercializing non-opioid pain management products.
• The company's commercial products include ZTlido, ELYXYB, and GLOPERBA.
• ZTlido is a prescription lidocaine topical product for neuropathic pain associated with postherpetic neuralgia (PHN).
• ELYXYB is an FDA-approved oral solution for the acute treatment of migraine.
• GLOPERBA is a liquid oral version of colchicine for the prophylaxis of painful gout flares in adults, launched in June 2024.
• Scilex has three product candidates in development: SEMDEXA (SP-102), SP-103, and SP-104.
• SEMDEXA is a viscous gel formulation of a corticosteroid for epidural injections to treat sciatica and has completed a Phase 3 study.
• SP-103 is a triple-strength formulation of ZTlido for the treatment of acute pain and has completed a Phase 2 trial in acute low back pain (LBP).
• SP-104 is a low-dose delayed-release naltrexone hydrochloride being developed for the treatment of fibromyalgia, for which Phase 1 trials were completed.
• The company's strategy includes maximizing the commercial potential of ZTlido, ELYXYB and GLOPERBA, developing and commercializing SEMDEXA, SP-103, and SP-104, and expanding the product portfolio.
• As of December 31, 2024, ZTlido had approximately 9.2% market share of the lidocaine patch prescription market across the territories covered in the United States.
• The total prescriptions of ZTlido for the year ended December 31, 2024 grew by approximately 2.4% over the year ended December 31, 2023, according to Symphony Healthcares national prescription data.
• The company is developing SEMDEXA to address the limitations associated with the available corticosteroid epidural injectable products that are used off-label.
• The company is developing SP-103 as a triple-strength lidocaine topical system for the treatment of acute pain.
• The company is developing SP-104 for the treatment of fibromyalgia.
• The company is continuously evaluating opportunities to leverage its research and development experience to develop non-opioid therapeutics for pain management indications that are not adequately served with existing treatment options.
• The company is also seeking to in-license or acquire non-opioid therapeutics that can both complement its existing product portfolio and benefit from its existing commercial infrastructure.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While there are positive aspects such as growing revenue and progress in clinical trials, there are also significant concerns about the company's financial condition, reliance on external factors, and potential risks.

Positives

• ZTlido has a growing market share and prescription volume.
• ELYXYB has shown strong growth since its commercial launch.
• GLOPERBA provides a new treatment option for gout.
• SEMDEXA has completed a Phase 3 study with positive results.
• SP-103 has completed a Phase 2 trial with positive results.
• SP-104 has completed Phase 1 trials.
• The company has a dedicated sales force and commercial infrastructure.
• The company has a patient-centric market access function.
• The company has a strong intellectual property portfolio.

Negatives

• The company has a limited operating history and has incurred significant losses since its inception.
• The company is heavily dependent on the commercial success of ZTlido.
• The company will require substantial additional funding, which may not be available on acceptable terms, or at all.
• The terms of the Oramed Note and the Tranche B Notes place restrictions on the company's operating and financial flexibility.
• The company may not be able to generate sufficient cash to service its indebtedness and other liquidity needs.
• The company's recurring losses from operations, negative cash flows and substantial cumulative net losses raise substantial doubt about its ability to continue as a going concern.
• The company obtains, or historically has obtained, its commercial supply of certain of its products, the clinical supply of its product candidates and certain of the raw materials used in its product candidates from sole or single source suppliers and manufacturers.
• The company relies on third parties to conduct its clinical trials and intends to rely on third parties to conduct all of its future clinical trials.
• The company is substantially dependent on the intellectual property it in-licenses from Oishi and Itochu, and if it loses the right to license such intellectual property or if the Product Development Agreement is terminated for any reason, its ability to commercialize ZTlido and develop and commercialize SP-103 would be harmed.
• The company is party to the Romeg License Agreement for the in-licensing of certain intellectual property rights from Romeg with respect to the commercialization of GLOPERBA, and if it loses the right to license such intellectual property or if the Romeg License Agreement is terminated for any reason, its ability to commercialize GLOPERBA would be harmed.
• If the company is unable to maintain patent protection for ZTlido, GLOPERBA, ELYXYB and its product candidates, or if the scope of the patent protection obtained is not sufficiently broad, it may not be able to compete effectively in its markets.
• The regulatory approval processes of the FDA and comparable non-U.S. regulatory authorities are lengthy, time-consuming and inherently unpredictable, and if the company is ultimately unable to obtain regulatory approval for its product candidates, its business, financial condition and results of operations will be substantially harmed.
• Any approved product candidate will be subject to ongoing and continued regulatory requirements, which may result in significant expense and limit the company's ability to commercialize such products.
• If the company is unable to retain its key executives, it may delay its development efforts and harm its business, financial condition and results of operations.
• Any disruption in the company's research and development facilities could adversely affect its business, financial condition and results of operations.
• If the company's operations and performance do not meet the expectations of investors or securities analysts, the market price of its securities may decline.
• The company is an emerging growth company, and it cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make its Common Stock less attractive to investors.

Risks

• Reliance on ZTlido sales and the need for additional funding.
• Dependence on third-party suppliers and manufacturers.
• Potential delays or failures in clinical trials.
• Competition from other pharmaceutical companies.
• Uncertainty in third-party payor coverage and reimbursement.
• Potential product liability claims.
• Dependence on key executives.
• Disruptions in research and development facilities.
• Inability to protect intellectual property.
• Stringent government regulations and potential changes in healthcare laws.
• Potential for cyberattacks and data breaches.
• Unstable market and economic conditions.
• Potential for reputational harm due to failures of product candidates.
• Potential for reputational harm due to failures to meet corporate responsibility and sustainability expectations.
• Anti-takeover provisions in the Certificate of Incorporation and the Bylaws and under Delaware law could make an acquisition of our Company, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
• The Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders and the federal district courts of the United States as the exclusive forum for litigation arising under the Securities Act, which could limit our stockholders ability to obtain a favorable judicial forum for disputes with the Company.
• We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.
• Future sales, or the perception of future sales, of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline.
• Our operating results may fluctuate significantly.
• Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.
• If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse opinion regarding our stock, our stock price and trading volume could decline.
• Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to ZTlido or our product candidates.
• Our failure to meet the continued listing standards of Nasdaq could result in a delisting of our Common Stock.
• We have in the past and may in the future be subject to short selling strategies that may drive down the market price of our Common Stock.
• Our ability to use our net operating loss and tax credit carryforwards may be subject to limitation.
• If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our Common Stock.

Future Outlook

The company expects to continue to incur substantial losses for the foreseeable future and may never become profitable. The company expects to continue to make investments in its sales and marketing organization and expand digital marketing efforts to broaden awareness of ZTlido, GLOPERBA and ELYXYB and in research and development, clinical trials and regulatory affairs to develop its product candidates, SEMDEXA, SP-103 and SP-104.

Management Comments

• Through rigorous research and development, we believe we are on the cusp of establishing Scilex as the preeminent name in commercial non-opioid pain management, specifically targeting the unmet needs in both acute and chronic pain sectors with our innovative and leading therapies.
• We believe that we have not only responded to the global demand for safer, more effective pain relief solutions, but also made substantial progress in demonstrating the rapid onset and enhanced safety of our products.

Industry Context

The pain management market is highly competitive and subject to rapid technological change. Scilex competes with pharmaceutical, biotechnology, and specialty pharmaceutical companies, many of which have greater resources and experience.

Comparison to Industry Standards

• The recommended first-line treatment for the relief of neuropathic pain associated with PHN includes topical lidocaine, gabapentinoids (which have been associated with the potential for abuse as well as numerous adverse events), antidepressants and a multi-modal approach.
• Topical lidocaine and gabapentinoids are preferred for combination therapies due to their low propensity for drug-to-drug interactions.
• For example, an eight-week combination use with pregabalin (Lyrica) has been proven to reduce pain in half for patients who had inadequate relief on monotherapy, despite titration of pregabalin to effect.
• This efficacy boost was achieved without tolerability issues or adding to side effects.
• Unlike transdermal medications that are designed to achieve systemic drug levels via absorption through the skin or mucosal membrane, leading to effects away from the application site, topical lidocaine has a local effect at the site of application.
• Because drug application is localized to the immediate area surrounding the patch, systemic absorption from a topical patch is low, reducing the risk of systemic side effects and lowering the potential for drug interactions relative to other systemic pharmacologic therapies.
• As a localized treatment, lidocaine patches have been used concomitantly with other medications in patients for whom monotherapy is inadequate.
• Furthermore, we believe medication administered topically rather than orally can improve patient compliance.
• While lidocaine patches have certain advantages over the treatment alternatives discussed above, certain patches have limitations that may impact efficacy.
• For example, poor adhesion of the patch is a leading problem for topical lidocaine patches cited in the FDA Adverse Event Reporting System (FAERS).
• Because the drug is incorporated in the adhesive for these products, patches must maintain adhesion or risk compromising the ability to deliver their full drug dose.
• As a result, establishing strong adhesion is a key factor for patient compliance and satisfaction.
• In draft guidance issued in July 2021, the FDA recommended that developers of topical and transdermal delivery systems (TDSs) conduct studies to characterize the adhesion performance of the product with suggested data requirements.
• Likewise, the FDA issued a draft guidance in October 2018 outlining the adhesion data requirements for generic TDSs.
• This guidance, along with Scilexs past experience with regulatory agencies, shows the FDAs interest and the importance of adhesion performance of these products.
• For many of the competing lidocaine patches, a common drawback is the usage of hydrogel technology that limits the overall pharmaceutical efficiency of the product, requiring more total drug to be loaded into the patch to deliver a sufficient amount of drug to achieve a therapeutic effect.
• For example, Lidoderm has a drug load of 700 mg drug but only delivers 3 2% of that drug load.
• Consequently, adhesive thickness must be increased in order to have a drug load sufficient to deliver a therapeutic dose of drug to the skin.
• As adhesive thickness increases, the products pliability can be compromised to the extent that the patch loses adhesion as the skin 8 moves and wrinkles through normal patient activity.
• The weight of the hydrogel patches (largely due to high water content) further contributes to the challenge in maintaining adhesion.
• The greater drug load also poses a risk of accidental exposure.
• For example, with a bioavailability of 3 2% of the 700 mg drug load for Lidoderm, there is over 650 mg of drug remaining on the patch at the end of the 12-hour administration period, as captured in a bolded warning on the product label.
• If improperly disposed of, the residual drug poses the potential risk to children, pets and others of accidental exposure to a toxic amount of lidocaine, although we believe the risk with this formulation has not been evaluated.
• In addition to prescription lidocaine patches, there are commercially-available OTC topical lidocaine products in the market, but none of these OTC products have been reviewed or approved by the FDA.
• Notably in 2003, the FDA proposed amending the tentative final monograph for OTC external analgesic drug products to clarify the status of patches (and poultices and plasters), noting that the dosage forms had not been determined to be generally recognized as safe and effective for any analgesia at that time.
• Therefore, the FDA would likely not consider these OTC products to be compliant with the monograph and do not have legal marketing status.
• As the U.S. population ages, the incidence of sciatica and the need for interventions are expected to continue to increase.
• For example, from 2000 to 2018, ESIs in Medicare beneficiaries increased by more than 125%.
• Although there are numerous etiologies of sciatica, and therapies may differ based on the etiology, pain management interventions for sciatica are usually multi-modal.
• Among the pain management interventions, ESI is considered to be efficacious and has been widely used by physicians across multiple specialties, including anesthesiology, physical medicine and rehabilitation and pain medicine.
• ESIs are used when a patients pain is inadequately controlled with oral pain medications, topical systems or interventions such as physical therapy.
• ESIs have demonstrated efficacy in reducing pain, restoring function, reducing the need for other health care and avoiding back surgery.
• When administering an ESI, many physicians use a particulate steroid (including methylprednisolone acetate, triamcinolone acetonide, or betamethasone sodium phosphate or betamethasone sodium acetate) instead of a non-particulate steroid (dexamethasone sodium phosphate) because early studies suggested that the duration of pain relief was longer with the particulates and fewer repeat injections were required, even though dexamethasone is considered an otherwise potent and therapeutically beneficial therapy.
• These steroid particles or their aggregates have at least two mechanisms for neurological damage: (1) they can act as emboli if injected into an artery and are of sufficient size to block small terminal arterioles supplying the brain or spinal cord and (2) several particulate steroids have an immediate and massive effect on microvascular perfusion because of formation of red blood cell aggregates.
• These emboli can cause rare but catastrophic neurologic injuries including stroke and spinal cord injury that can result in increased pain, severe permanent disability or death.
• In addition, fungal meningitis has occurred from the injection of steroids manufactured in a compounding pharmacy that did not adhere to sterility standards.
• The FDA has been evaluating serious neurologic events with ESIs since 2009, and in 2014, the FDA required a class warning on the currently off-label use of injectable corticosteroids to include information about the risk of serious neurologic events with ESIs.
• The warning on product labels for all injectable glucocorticoids states that the product is to be used for intramuscular or intravenous purposes only, and specifically includes a warning for serious neurologic adverse reactions with epidural administration.
• These serious neurologic events have been reported with and without the use of fluoroscopy.
• The class warning also includes a statement that safety and effectiveness of epidural administration of these corticosteroids have not been established.
• Currently approved products for pain in fibromyalgia, including duloxetine, pregabalin and milnacipran, have limited efficacy.
• Responders applying such products can only demonstrate a 27% to 40% reduction of symptoms, which is far below the commonly accepted threshold of 50% to prove efficacy in treating fibromyalgia.
• In light of this, we believe new treatments with higher efficacy are needed to improve management of fibromyalgia.

Legal Proceedings

• The company was involved in a legal settlement with Virpax Pharmaceuticals, Inc. regarding a former employee action.
• The company was involved in patent litigation with Aveva Drug Delivery Systems, Inc. regarding ZTlido patents, which was decided against the company and is being appealed.
• The company was involved in patent litigation with Takeda Pharmaceuticals U.S.A., Inc. regarding GLOPERBA patents, which was settled.

Related Party Transactions

• Sorrento previously supported many of the company's important corporate functions.
• The company repurchased shares of its Common Stock and Series A Preferred Stock from Sorrento.
• The company entered into a letter agreement with Oramed, a significant stockholder, to extend the maturity date of the Oramed Note.
• Tien-Li Lee, M.D., a former member of our board of directors (the Board), is the founder, chief executive officer and a member of the board of directors of Aardvark.

Stakeholder Impact

• Shareholders may experience dilution from future equity offerings.
• Employees may be affected by changes in compensation and benefits.
• Customers may benefit from new and improved pain management products.
• Suppliers and creditors may be affected by the company's financial condition and ability to meet its obligations.

Next Steps

• Continue commercialization efforts for ZTlido, ELYXYB and GLOPERBA.
• Advance development of product candidates SEMDEXA, SP-103 and SP-104.
• Explore opportunities to expand the product portfolio.
• Seek regulatory approvals for product candidates.
• Secure additional funding to support operations and growth.

Key Dates

Keywords

Scilex Holding Company, non-opioid pain management, ZTlido, ELYXYB, GLOPERBA, SEMDEXA, SP-103, SP-104, clinical trials, FDA approval, pharmaceuticals, market share, licensing agreements, financial results, risk factors