Zacks Small Cap Research – SCLX Makes Move to Boost Shareholder Value – Technologist

By Brad Sorensen, CFA

NASDAQ:SCLX

READ THE FULL SCLX RESEARCH REPORT

Scilex Holding Company (NASDAQ:SCLX) is a revenue-generating company that is focused on addressing one of the biggest issues facing humanity today—that of the overuse of opioids. Scilex is focused on developing non-opioid pain management products that provide the relief patients so desperately need, while avoiding the debilitating addiction that often comes with the use of opioids. Roughly 112,000 Americans died in 2023 from overdoses and there we have no doubt that a good number of those involved opioid use at some point to reduce physical pain of various types.

Scilex announced that its subsidiary, Semnur, whose lead product is SP-102 and is described below, and a SPAC known as the Denali Capital Acquisition Corp (DECA-NASDAQ) have come to a merger agreement. The merger is expected to close in early 2025, at which time, the company notes, the combined entity will be spun off and begin trading on the Nasdaq under the symbol SMNR. We believe this is a positive development for shareholders that will help to unlock value for existing shareholders of SCLX and provide the needed capital to advance SP-102 toward the commercialization stage.

SP-102 (with the trade name Semdexa), is the first non-opioid novel injectable corticosteroid gel formulation for patients with moderate to severe chronic radicular pain/sciatica, containing no preservatives, surfactants, solvents, or particulates. The company notes that if the drug is approved by the FDA, it will be available in a pre-filled syringe formulation and will be administered as an epidural injection for the treatment of sciatica. The Scilex subsidiary, Semnur, has completed a Phase 3 trial for SP-102, which met primary and important key secondary endpoints, decreasing pain intensity for over a month in sciatica patients and resulting in statistically significant and clinically meaningful improvement in the disability index score while maintaining safety comparable to placebo. The company notes that this Phase 3 study represents a potential significant improvement in treatment of adult patients with lumbosacral radicular pain (sciatica), who struggle with the clinical consequences of no currently FDA approved therapies, suboptimal formulations of corticosteroids used off-label and/or excess pain and disability.

Sciatica is a term used to describe a set of symptoms rather than a specific medical condition. It refers to pain that radiates along the path of the sciatic nerve, which is the longest nerve in the human body. The sciatic nerve runs from the lower back, through the buttocks, and down each leg. Sciatica typically affects only one side of the body.

The most common cause of sciatica is compression or irritation of the sciatic nerve, often due to a herniated or slipped disc in the lumbar spine (lower back). Other potential causes of sciatica include spinal stenosis (narrowing of the spinal canal), spondylolisthesis (a condition where one vertebra slips over another), piriformis syndrome (compression of the sciatic nerve by the piriformis muscle in the buttocks), or even injury to the nerve itself.

The primary symptom of sciatica is pain, which can vary in intensity and location but usually follows the path of the sciatic nerve. Common symptoms and characteristics of sciatica include:

1. Sharp or shooting pain: This pain can be severe and may feel like an electric shock.

2. Constant pain: Sciatica pain can be continuous or intermittent, and it often worsens with movements like coughing or sneezing.

3. Numbness and tingling: People with sciatica may experience numbness, tingling, or a “pins and needles” sensation in the affected leg or foot.

4. Weakness: Some individuals with sciatica may also experience weakness in the leg or foot on the affected side, making it difficult to move or bear weight.

It is easy to see why an improved and effective treatment that provides relief from the pain of sciatica would likely be welcomed enthusiastically by sufferers. In fact, the company notes that, based on the independent market research conducted by Syneos Health Consulting in 2020 and 2021, given the potential substantial utilization of SP-102, by the 5th year of launch, sales of Semdexa in sciatica are projected to reach $1.5 billion to $2.0 billion annually.

This announcement and plans for the future that we’ve discussed at length reinforce our belief that SCLX is poised to resume its move higher and that investors continue to underestimate the value of the treatments the company currently has and is developing. We appreciate that the company is attempting to unlock some of that value by this transaction and urge investors to take a look at a company that is earning revenue, growing that revenue in a meaningful way, and adding to its portfolio of very important treatments before the rest of the investing community realizes the story developing at Scilex.

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