Item 1.01. Entry into a Material Definitive Agreement.
As previously disclosed by Scilex Holding Company (the Company), on March 12, 2021, Scilex Pharmaceuticals Inc., the Companys wholly
owned subsidiary (Scilex Pharma), and Sorrento Therapeutics, Inc. (Sorrento, together with Scilex Pharma, the Plaintiffs) filed an action (the Action) in the Delaware Court of Chancery (the
Court) against the former President of Scilex Pharma, Anthony Mack, and Virpax Pharmaceuticals, Inc. (Virpax, together with Anthony Mack, the Defendants), a company founded and then headed by Mr. Mack,
alleging, among other things, breach by Mr. Mack of a restrictive covenant agreement with Sorrento related to his sale of his Scilex Pharma stock to Sorrento, tortious interference with that agreement by Virpax, breach of Mr. Macks
fiduciary duties to Scilex Pharma, aiding and abetting of that breach by Virpax, and misappropriation of Scilex Pharmas trade secrets by Mr. Mack and Virpax. Such lawsuit sought, among other relief, damages and various forms of injunctive
relief. The case was tried from September 12, 2022 to September 14, 2022. On September 1, 2023, the Court found in favor of the Plaintiffs on all but three counts deemed to have been waived. In its
95-page opinion, the Court instructed the parties to submit supplemental briefing on the appropriate remedy to implement its rulings. On October 18, 2023, Plaintiffs submitted a supplemental brief on
remedies. On November 29, 2023, Defendants submitted a supplemental brief on remedies. On December 21, 2023, Plaintiffs submitted a supplemental reply brief on remedies.
On February 26, 2024, the Plaintiffs and Virpax entered into a term sheet regarding a mutual release and settlement agreement (the Settlement Term
Sheet), pursuant to which the parties have agreed to enter a definitive settlement agreement by or before March 1, 2024 to resolve their ongoing disputes and provide for, among other things, that Virpax will be obligated to make the
following payments to the Company to settle the Action: (i) $3.5 million by March 1, 2024 (the Initial Payment); (ii) $2.5 million by July 1, 2024 and (iii) to the extent any of the following drug candidates are
ever sold, royalty payments of (a) 6% of annual Net Sales (as defined therein) of Epoladerm; (b) 6% of annual Net Sales of Probudur and (c) 6% of annual Net Sales of Envelta. Such royalty payments will end upon (i) expiration of the last-to-expire valid patent claim of Virpax or its licensor covering the manufacture, use or sale of such product in such country; and (ii) expiration of any period of
regulatory exclusivity for such product in such country.
In addition, the Settlement Term Sheet provides that Virpax will be obligated to remove from its
computing systems, and destroy all hard copies of, any nonpublic information of the Company, and create a preservation copy of such information that shall be maintained until a binding settlement or final,
non-appealable decision is reached as to all parties to the litigation.
Each of the Plaintiffs and Virpax
provides mutual releases of all claims that exist as of the date of the execution of the Settlement Term Sheet, whether known or unknown, arising from any allegations set forth in the Action. The Plaintiffs release relates to claims against
Virpax only, which shall not affect the Plaintiffs claims against Mr. Mack. Plaintiffs have not released Mr. Mack, and litigation against him remains ongoing. Plaintiffs release as to Virpax is conditioned upon Virpaxs
Initial Payment. The Plaintiffs and Virpax are required to make best efforts to enter into a definitive agreement with respect to the terms set forth in the Settlement Term Sheet, but if they fail to do so by or before March 1, 2024, such term
sheet will be binding and enforceable with respect to all the terms set forth therein.
The foregoing is a summary of the material terms of the Settlement
Term Sheet, does not purport to be complete and is subject to, and qualified in its entirety by, such document attached as Exhibit 10.1, to this Current Report on Form 8-K, which is incorporated herein by
reference.
Item 8.01. Other Events.
On
February 26, 2024, the Company issued a press release announcing the Settlement. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by
reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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10.1 |
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Settlement Term Sheet, dated February 26, 2024, by and between Scilex Pharmaceuticals Inc., Sorrento Therapeutics, Inc. and Virpax Pharmaceuticals, Inc. |
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99.1 |
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Press Release, dated February 26, 2024. |
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104 |
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Cover Page Interactive Data File, formatted in Inline Extensible Business Reporting Language (iXBRL). |