Scilex Holding Co Fair Value Disclosure
5. Fair Value Measurements
The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and the level of inputs used in such measurements (in thousands):
|
|
December 31, 2025 |
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|||||||||||||
|
|
Balance |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant Unobservable Inputs (Level 3) |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Equity method investment, at fair value |
|
$ |
159,403 |
|
|
$ |
159,403 |
|
|
$ |
— |
|
|
$ |
— |
|
Marketable securities |
|
|
6,026 |
|
|
|
6,026 |
|
|
|
— |
|
|
|
— |
|
Digital assets |
|
|
64,711 |
|
|
|
64,711 |
|
|
|
— |
|
|
|
— |
|
Total assets |
|
$ |
230,140 |
|
|
$ |
230,140 |
|
|
$ |
— |
|
|
$ |
— |
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Oramed Note |
|
$ |
27,688 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
27,688 |
|
Tranche B Notes |
|
|
17,500 |
|
|
|
— |
|
|
|
— |
|
|
|
17,500 |
|
Purchased revenue liability |
|
|
8,400 |
|
|
|
— |
|
|
|
— |
|
|
|
8,400 |
|
|
|
50,599 |
|
|
|
— |
|
|
|
— |
|
|
|
50,599 |
|
|
Contingent consideration short-term |
|
|
3,013 |
|
|
|
3,013 |
|
|
|
— |
|
|
|
— |
|
Other long-term liabilities |
|
|
174 |
|
|
|
— |
|
|
|
— |
|
|
|
174 |
|
Total liabilities measured at fair value |
|
$ |
107,374 |
|
|
$ |
3,013 |
|
|
$ |
— |
|
|
$ |
104,361 |
|
|
|
December 31, 2024 |
|
|||||||||||||
|
|
Balance |
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Oramed Note |
|
$ |
12,161 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
12,161 |
|
Tranche B Notes |
|
|
23,560 |
|
|
|
— |
|
|
|
— |
|
|
|
23,560 |
|
Purchased revenue liability |
|
|
6,800 |
|
|
|
— |
|
|
|
— |
|
|
|
6,800 |
|
|
|
18,303 |
|
|
|
— |
|
|
|
— |
|
|
|
18,303 |
|
|
Other long-term liabilities |
|
|
155 |
|
|
|
— |
|
|
|
— |
|
|
|
155 |
|
Total liabilities measured at fair value |
|
$ |
60,979 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
60,979 |
|
Equity method investment
As described in Note 1 above and Note 6 below, upon the additional closing under the Datavault SPA, the Company accounted for investment in Datavault Common Stock in accordance with the equity method. The Company determines the fair value of its Datavault investment by taking the publicly available share price as of the balance sheet date multiplied by the number of shares the Company holds. There are no non-observable inputs in determining the fair value.
Digital assets
As of December 31, 2025, the Company determines the fair value of its digital asset investment by taking the averages of publicly available price of Bitcoin on multiple platform as of the balance sheet date multiplied by the number of Bitcoin the Company holds. There are no non-observable inputs in determining the fair value.
The Oramed Note
In September 2023, the Company issued a senior secured promissory note to Oramed in the principal amount of $101.9 million (the “Oramed Note”) (see Note 8). The Company elected the fair value option to account for the Oramed Note with any changes in the fair value of such note recorded in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The Company uses a discounted cash flow model to determine the fair value of the Oramed Note based on Level 3 inputs. This methodology discounts the interest and principal payments using a risk-adjusted discount rate. The fair value as of December 31, 2025 and 2024 was determined to be $27.7 million and $12.2 million, respectively, by applying a discount rate of 21.00% and 128.82%, respectively. For the years ended December 31, 2025 and 2024, the Company recorded a loss of $8.4 million and $3.6 million in change in fair value of the Oramed Note, respectively. For the years ended December 31, 2025 and 2024, the change in fair value due to instrument-specific credit risk recorded as a component of other comprehensive income was $7.1 million and $6.3 million, respectively. During the year ended December 31, 2024, the Company reclassified $5.0 million from accumulated other comprehensive income to the consolidated statement of operations. This reclassification was related to the principal payments and partial conversion of the Oramed Note balance into the Tranche B Notes (see Note 8).
Tranche B Notes
In October 2024, the Company entered into the Tranche B Securities Purchase Agreement to issue and sell the Tranche B Notes in the principal amount of $50.0 million (see Note 8). The Company elected the fair value option to account for the Tranche B Notes with any changes in the fair value of such notes recorded in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The Tranche B Notes are measured at fair value on a recurring basis using the Level 3 inputs. The Company uses the Binomial Lattice Model valuation technique to measure the fair value of the Tranche B Notes. The fair value as of December 31, 2025 and 2024, was determined to be $17.5 million and $23.6 million. For the year ended December 31, 2025 and 2024, the Company recorded a loss of $12.9 million and a gain of $6.6 million in change in fair value of the Tranche B Notes in the consolidated statement of operations. For the year ended December 31, 2025 and 2024, the change in fair value due to instrument-specific credit risk recorded as a component of other comprehensive income was $4.3 million and nil, respectively.
Purchased Revenue Liability
In October 2024, the Company entered into the ZTlido Royalty Purchase Agreement with the “ZTlido Royalty Investors” and Oramed (see Note 8). In February 2025, the Company also entered into “the Gloperba-Elyxyb Royalty Purchase Agreement”) with the “Gloperba-Elyxyb Royalty Investors” and Oramed (see Note 8). The Company elected the fair value option for the purchased revenue liability with changes in fair value recorded as change in fair value of debt and liability instruments in the consolidated statements of operations, with the exception of changes in fair value due to instrument-specific credit risk, if any, which are recorded as a component of other comprehensive income. The Company uses a Scenario-Based Method valuation technique to measure the fair value of the purchased revenue liability. The aggregate fair value of both agreements as of December 31, 2025 and 2024, was determined to be $8.4 million and $6.8 million, respectively. For the year ended December 31, 2025 and 2024, the Company recorded a loss of $4.4 million and $0.9 million, respectively, in change in fair value of the purchased revenue liability in the consolidated statement of operations.
Derivative Liabilities
As of December 31, 2025, the following warrants to purchase Common Stock that are included in derivative liabilities were outstanding: 1,000,000 Private Warrants, which are currently exercisable for an aggregate of up to 28,572 shares of Common Stock February 2024 BDO Firm Warrants, which are currently exercisable for an aggregate of up to 108,686 shares of Common Stock, 3,250,000 Deposit Warrant, which are currently exercisable for an aggregate of up
to 3,250,000 shares of Common Stock, 3,750,000 October 2024 Noteholder Warrants, which are currently exercisable for an aggregate of up to 107,142 shares of Common Stock, and 18,809,454 December 2024 RDO Common Warrants, which are currently exercisable for an aggregate of up to 537,298 shares of Common Stock, 500,000 Exchange Warrants, 275,000 September 2025 Warrants and 1,356,594 November 2025 Warrants. As of December 31, 2025, the fair value of derivative warrant liabilities related to these warrants was $50.6 million.
The Company recorded a loss of $22.7 million for the year ended December 31, 2025, attributed to warrant liabilities consisting of the Private Warrants, the February 2024 BDO Firm Warrants, the April 2024 RDO Common Warrants, Deposit Warrant, the October 2024 Noteholder Warrants, December 2024 RDO Common Warrants, the Exchange Warrants, the September 2025 Warrants and November 2025 Warrants (each as defined below). The Company recorded a gain of $17.4 million for the year ended December 31, 2024, attributed to warrant liabilities consisting of the Private Warrants, the February 2024 BDO Firm Warrants, the April 2024 RDO Common Warrants, the October 2024 Noteholder Warrants, and December 2024 RDO Common Warrants.
The Company evaluated the Scilex-St. James Loans for embedded derivatives and identified certain features that required bifurcation because they are not clearly and closely related to the host instrument. The embedded derivatives relate to (i) default provisions that could require additional interest payments, and (ii) a provision which could require the settlement of the principal amount of the Notes through the Pledged Securities upon an uncured event of default. The Company determined that the fair value of these embedded derivatives was immaterial as of the issuance dates of the Notes and as of December 31, 2025.
The following table includes a summary of the derivative liabilities measured at fair value during the years ended December 31, 2025 and 2024 (in thousands):
|
|
Fair Value |
|
|
Ending Balance as of December 31, 2024 |
|
$ |
18,303 |
|
Change in fair value measurement |
|
|
22,693 |
|
Issuance of September 2025 Warrants |
|
|
3,091 |
|
Issuance of November 2025 Warrants |
|
|
6,248 |
|
Tranche B deferral modification |
|
|
(839 |
) |
Change in fair value related to the October 2024 Noteholder Warrants exchanged for Exchange Warrants |
|
|
1,103 |
|
Ending Balance as of December 31, 2025 |
|
$ |
50,599 |
|
Warrant Liability Measurement
The derivative warrant liability was valued using the Black-Scholes option pricing model, which is considered to be Level 3 fair value measurement. The primary unobservable input utilized in determining the fair value of the warrant is the expected volatility of the Common Stock. The expected volatility assumption is based on the Company’s historical volatility, historical volatilities of comparable companies whose share prices are publicly available as well as the implied volatility of the Public Warrants (see Note 10).
A summary of the inputs used in valuing the derivative warrant liabilities as of December 31, 2025 is as follows:
|
|
Private Warrants |
|
|
February 2024 BDO Firm Warrants |
|
|
Deposit Warrant |
|
|
October 2024 Noteholder Warrants |
|
|
December 2024 RDO Common Warrants (5yr) |
|
|
December 2024 RDO Common Warrants (2.5yr) |
|
|
Exchange Warrants |
|
September 2025 Warrants |
|
November 2025 Warrants |
|
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Exercise price |
|
$ |
402.50 |
|
|
$ |
59.50 |
|
|
$ |
1.20 |
|
|
$ |
36.40 |
|
|
$ |
22.72 |
|
|
$ |
22.72 |
|
|
$ |
40.00 |
|
$ |
20.00 |
|
$ |
29.00 |
|
Term, in years |
|
|
1.86 |
|
|
|
3.18 |
|
|
|
3.47 |
|
|
|
3.77 |
|
|
|
3.95 |
|
|
|
1.45 |
|
|
|
3.77 |
|
|
3.95 |
|
|
4.90 |
|
Volatility |
|
|
98.0 |
% |
|
|
81.0 |
% |
|
|
76.0 |
% |
|
|
79.0 |
% |
|
|
78.0 |
% |
|
|
93.0 |
% |
|
|
79.0 |
% |
|
74.0 |
% |
|
80.0 |
% |
Risk-free rate |
|
|
3.44 |
% |
|
|
3.53 |
% |
|
|
3.56 |
% |
|
|
3.59 |
% |
|
|
3.60 |
% |
|
|
3.45 |
% |
|
|
3.59 |
% |
|
3.60 |
% |
|
3.69 |
% |
Dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
0.0 |
% |
|
0.0 |
% |
A summary of the inputs used in valuing the derivative warrant liabilities as of December 31, 2024 is as follows:
|
|
Private Warrants |
|
|
February 2024 BDO Firm Warrants |
|
|
April 2024 RDO Common Warrants |
|
|
Deposit Warrant |
|
|
October 2024 Noteholder Warrants |
|
|
December 2024 RDO Common Warrants (5yr) |
|
|
December 2024 RDO Common Warrants (2.5yr) |
|
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Exercise price |
|
$ |
402.50 |
|
|
$ |
59.50 |
|
|
$ |
38.50 |
|
|
$ |
1.20 |
|
|
$ |
36.40 |
|
|
$ |
22.72 |
|
|
$ |
22.72 |
|
Term, in years |
|
|
2.86 |
|
|
|
418.00 |
|
|
|
4.32 |
|
|
|
4.47 |
|
|
|
4.77 |
|
|
|
4.95 |
|
|
|
2.45 |
|
Volatility |
|
|
109.0 |
% |
|
|
81.0 |
% |
|
|
80.0 |
% |
|
|
73.0 |
% |
|
|
77.0 |
% |
|
|
76.0 |
% |
|
|
95.0 |
% |
Risk-free rate |
|
|
4.22 |
% |
|
|
4.29 |
% |
|
|
4.30 |
% |
|
|
4.30 |
% |
|
|
4.32 |
% |
|
|
4.33 |
% |
|
|
4.21 |
% |
Dividend yield |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
Contingent Consideration Related to SP-104 Acquisition
The Development Milestone Payment related to the SP-104 Assets represents an obligation to potentially settle a fixed value in a variable number of shares of Common Stock and requires remeasurement at fair value through settlement.
Upon the achievement of FDA approval for a new drug application for SP-104, the Company will transfer $3.0 million in cash or shares of Common Stock, at the discretion of the Company. The fair value of the contingent consideration liability associated with the Development Milestone Payment was estimated using a probability-weighted discounted cash flow method. Significant unobservable inputs assumptions included the likelihood of receiving FDA approval for SP-104, expected timing for receipt of FDA approval for SP-104, and a discount rate of 9.2%. As of December 31, 2025 and 2024, the fair value of contingent consideration related to the Development Milestone Payment was $0.2 million.
There were no transfers between fair value measurement levels during the years ended December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 10, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 12, 2024 | |
| 2022 | Mar 7, 2023 | |
| 2021 | Feb 24, 2022 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.