Significant Agreements and Contracts	6 Months Ended
Jun. 30, 2022
Significant Agreements And Contracts [Abstract]
Significant Agreements and Contracts	6. Significant Agreements and Contracts 2022 Acquisitions Romeg License Agreement On June 14, 2022, the Company's majority-owned subsidiary, Scilex Holding, entered into a License Agreement (the “License Agreement”) with RxOmeg Therapeutics, LLC (a/k/a Romeg Therapeutics, Inc.) (“Romeg”). Pursuant to the License Agreement, among other things, Romeg granted Scilex Holding (a) a transferable license, with the right to sublicense, under the patents and know-how specified therein (with such license to know-how being exclusive for the limited purposes specified therein) to (i) commercialize the pharmaceutical product comprising liquid formulations of colchicine for the prophylactic treatment of gout in adult humans (the “Initial Licensed Product”) in the United States of America (including its territories) (the “Territory”), (ii) develop other products comprising the Initial Licensed Product as an active pharmaceutical ingredient (the “Licensed Products”) and commercialize any such products and (iii) manufacture Licensed Products anywhere in the world, solely for commercialization in the Territory; and (b) an exclusive, transferable license, with right to sublicense, to use the trademark GLOPERBA and logos, designs, translations, and modifications thereof in connection with the commercialization of the Initial Licensed Product solely in the Territory. As consideration for the license under the License Agreement, Scilex Holding paid Romeg an up-front license fee of $2.0 million, and has agreed to pay Romeg (a) upon Scilex Holding's achievement of certain net sales milestones, certain milestone payments in the aggregate amount of up to $13.0 million, (b) certain royalties in the mid-single digit to low-double digit percentages based on annual net sales of the Licensed Product by Scilex Holding during the applicable royalty term under the License Agreement, and (c) a minimum quarterly royalty payment commencing on the first year anniversary of the effective date of the License Agreement and ending on the later of (i) expiration of the last to expire of the licensed patents covering the Licensed Products in the Territory or (ii) the tenth anniversary of the effective date of the License Agreement. The transaction was accounted for as an asset acquisition since the Initial Licensed Product was approved and made available in the United States in 2020 and substantially all the value of the gross assets was concentrated in a single asset, which is the Initial Licensed Product. In connection with the License Agreement, Scilex Holding recorded an intangible asset for the acquired license of $5.7 million, which is comprised of the upfront license fee of $2.0 million and a deferred consideration of $3.7 million that is the present value of the future minimum royalty payments and immaterial transaction costs. The contingent sales milestones and sale volume-based future royalties were determined to meet a scope exception for derivative under Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, and not to be probable at June 30, 2022; therefore, they were not recognized as a liability or included in the fair value of the asset as of June 30, 2022. The Company determined the useful life of the intangible asset to be 15 years, which approximates the life of the licensed patents covering the Initial Licensed Product. Zhengzhou Fortune Bioscience Co., Ltd. In May 2022, the Company completed an acquisition of 51% of the equity interests of Zhengzhou Fortune Bioscience Co., Ltd (“ZFB”) for $5.0 million in cash under a joint venture agreement and equity subscription agreement, as amended (collectively, the “ZFB Agreements”). ZFB is a manufacturer in China of lateral flow diagnostic tests, including COVISTIX, the Company’s COVID-19 virus rapid antigen detection test kit currently being sold in Mexico. Under the ZFB Agreements, the Company has the option to acquire from the minority equity holder the remaining 49% of the aggregate equity interests of ZFB for $50.0 million before December 31, 2022 (the “Subsequent Transaction”). If the Subsequent Transaction does not occur, the Company or ZFB may terminate the ZFB Agreements, and the Company’s 51% of equity interest in ZFB will be redeemed by ZFB for $5.0 million. The Company determined that it holds a variable interest in ZFB at completion of the transaction based on its investment in equity interests and its right to acquire the remaining equity interests of ZFB. The Company also determined that ZFB is a variable interest entity (“VIE”) and that the Company is the primary beneficiary of the VIE as the Company has control over ZFB through its control over ZFB’s board of directors, the Company’s ownership of a majority of voting equity interests as well as other sole decision-making rights under the ZFB Agreements to direct the most important activities of ZFB. As such, the Company accounted for the transaction as a business combination and applied the acquisition method of accounting. The Company recorded the tangible and intangible assets acquired and liabilities assumed and the non-controlling interest at their estimated fair values as of the acquisition date. The Company’s initial accounting for the transaction has not been completed as of June 30, 2022 due to the insufficiency of the information the Company has obtained to identify and measure the fair value of the assets acquired and liabilities assumed, non-controlling interest in ZFB as well as any potential goodwill to be recognized. The Company recorded a provisional purchase price allocation based on its best estimates using information obtained as of the date of this report. The initial purchase price of $0.2 million represents $5.0 million cash consideration net of $4.8 million in pre-acquisition inter-company payables to ZFB that was preliminarily deemed settled upon acquisition; the accounting for the pre-existing relationship is still under evaluation. The preliminary allocation of the purchase price consisted of (1) $8.5 million of fair value of tangible assets acquired, (2) $5.5 million of liabilities assumed, and (3) $1.9 million of goodwill and intangibles. The fair value of non-controlling interest of $4.8 million at acquisition date was derived from the $5.0 million consideration paid for the 51% equity interest in ZFB, which was preliminarily deemed to approximate the fair value. The preliminary purchase price allocation falls within the measurement period and therefore the Company may adjust these provisional amounts to reflect new information obtained about facts and circumstances that existed as of the acquisition date. Acquisition of Virex On February 1, 2022, the Company completed the acquisition of Virex Health, Inc. (“Virex”), a developer of at-home diagnostic platforms based in Boston, Massachusetts. In accordance with Accounting Standards Codification Topic 805, the Company recorded consideration transferred totaling $11.4 million, including $6.8 million in cash, $0.1 million in transaction costs paid in cash and 1,281,662 shares of the Company's common stock, or $4.5 million of consideration based on the Company's closing share price on February 1, 2022. In connection with the acquisition of Virex, the Company may pay up to $10.0 million in contingent consideration in a combination of cash and stock subject to the achievement of certain regulatory milestones. The transaction was accounted for as an asset acquisition since substantially all the value of the gross assets was concentrated in a single asset. No contingent consideration was recorded as of June 30, 2022. The Company fully expensed an amount of $11.7 million, representing the consideration transferred, net of short-term liabilities assumed, to acquired IPR&D. 2021 Acquisitions Acquisition of ACEA On June 1, 2021, the Company completed the acquisition of ACEA, which is developing multiple clinical and preclinical-stage new chemical entity compounds, including the late clinical drug candidate, Abivertinib. The final purchase price allocation was calculated based on an upfront consideration of $44.1 million, which was based on the Company’s closing share price on June 1, 2021, and resulted in separate and distinct intangible assets comprised of acquired IPR&D of $190.8 million, of which $90.8 million associated with Abivertinib for the treatment of hospitalized COVID-19 patients was deemed impaired and written off during the second quarter of 2022 (see Note 5 for details), goodwill of $36.0 million, fair value of debt assumed of approximately $32.1 million, deferred tax liabilities of $31.4 million and other net assets of approximately $2.9 million. Pursuant to the terms of the merger agreement entered into with ACEA, a portion of the upfront consideration equal to $38.1 million was used to repay certain existing indebtedness of ACEA, which amount was paid to the holders thereof in the form of shares of common stock of the Company and an aggregate of 5.5 million shares (“Indebtedness Shares”) of the Company’s common stock were issued in respect thereof based on a price per share equal to $6.8955. The Indebtedness Shares are subject to a true-up, as set forth in the merger agreement entered into with ACEA, if the price at which such shares were issued is greater than the closing price of the Company’s common stock on the date that is six months after June 1, 2021. The Company recorded $7.5 million associated with the true-up as a current liability at June 30, 2022. In addition to the Closing Consideration, the Company may pay the ACEA equityholders contingent consideration of (i) up to $450.0 million in additional payments, subject to the receipt of certain regulatory approvals and achievement of certain net sales targets with respect to the assets acquired from ACEA and (ii) five to ten percent of the annual net sales on specified royalty-bearing products. See Note 3 for details.

Significant Agreements and Contracts

6 Months Ended

Jun. 30, 2022

Significant Agreements And Contracts [Abstract]

6. Significant Agreements and Contracts

2022 Acquisitions

Romeg License Agreement

On June 14, 2022, the Company's majority-owned subsidiary, Scilex Holding, entered into a License Agreement (the “License Agreement”) with RxOmeg Therapeutics, LLC (a/k/a Romeg Therapeutics, Inc.) (“Romeg”). Pursuant to the License Agreement, among other things, Romeg granted Scilex Holding (a) a transferable license, with the right to sublicense, under the patents and know-how specified therein (with such license to know-how being exclusive for the limited purposes specified therein) to (i) commercialize the pharmaceutical product comprising liquid formulations of colchicine for the prophylactic treatment of gout in adult humans (the “Initial Licensed Product”) in the United States of America (including its territories) (the “Territory”), (ii) develop other products comprising the Initial Licensed Product as an active pharmaceutical ingredient (the “Licensed Products”) and commercialize any such products and (iii) manufacture Licensed Products anywhere in the world, solely for commercialization in the Territory; and (b) an exclusive, transferable license, with right to sublicense, to use the trademark GLOPERBA and logos, designs, translations, and modifications thereof in connection with the commercialization of the Initial Licensed Product solely in the Territory.

As consideration for the license under the License Agreement, Scilex Holding paid Romeg an up-front license fee of $2.0 million, and has agreed to pay Romeg (a) upon Scilex Holding's achievement of certain net sales milestones, certain milestone payments in the aggregate amount of up to $13.0 million, (b) certain royalties in the mid-single digit to low-double digit percentages based on annual net sales of the Licensed Product by Scilex Holding during the applicable royalty term under the License Agreement, and (c) a minimum quarterly royalty payment commencing on the first year anniversary of the effective date of the License Agreement and ending on the later of (i) expiration of the last to expire of the licensed patents covering the Licensed Products in the Territory or (ii) the tenth anniversary of the effective date of the License Agreement.

The transaction was accounted for as an asset acquisition since the Initial Licensed Product was approved and made available in the United States in 2020 and substantially all the value of the gross assets was concentrated in a single asset, which is the Initial Licensed Product. In connection with the License Agreement, Scilex Holding recorded an intangible asset for the acquired license of $5.7 million, which is comprised of the upfront license fee of $2.0 million and a deferred consideration of $3.7 million that is the present value of the future minimum royalty payments and immaterial transaction costs. The contingent sales milestones and sale volume-based future royalties were determined to meet a scope exception for derivative under Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, and not to be probable at June 30, 2022; therefore, they were not recognized as a liability or included in the fair value of the asset as of June 30, 2022. The Company determined the useful life of the intangible asset to be 15 years, which approximates the life of the licensed patents covering the Initial Licensed Product.

Zhengzhou Fortune Bioscience Co., Ltd.

In May 2022, the Company completed an acquisition of 51% of the equity interests of Zhengzhou Fortune Bioscience Co., Ltd (“ZFB”) for $5.0 million in cash under a joint venture agreement and equity subscription agreement, as amended (collectively, the “ZFB Agreements”). ZFB is a manufacturer in China of lateral flow diagnostic tests, including COVISTIX, the Company’s COVID-19 virus rapid antigen detection test kit currently being sold in Mexico. Under the ZFB Agreements, the Company has the option to acquire from the minority equity holder the remaining 49% of the aggregate equity interests of ZFB for $50.0 million before December 31, 2022 (the “Subsequent Transaction”). If the Subsequent Transaction does not occur, the Company or ZFB may terminate the ZFB Agreements, and the Company’s 51% of equity interest in ZFB will be redeemed by ZFB for $5.0 million.

The Company determined that it holds a variable interest in ZFB at completion of the transaction based on its investment in equity interests and its right to acquire the remaining equity interests of ZFB. The Company also determined that ZFB is a variable interest entity (“VIE”) and that the Company is the primary beneficiary of the VIE as the Company has control over ZFB through its control over ZFB’s board of directors, the Company’s ownership of a majority of voting equity interests as well as other sole decision-making rights under the ZFB Agreements to direct the most important activities of ZFB. As such, the Company accounted for the transaction as a business combination and applied the acquisition method of accounting. The Company recorded the tangible and intangible assets acquired and liabilities assumed and the non-controlling interest at their estimated fair values as of the acquisition date.

The Company’s initial accounting for the transaction has not been completed as of June 30, 2022 due to the insufficiency of the information the Company has obtained to identify and measure the fair value of the assets acquired and liabilities assumed, non-controlling interest in ZFB as well as any potential goodwill to be recognized. The Company recorded a provisional purchase price allocation based on its best estimates using information obtained as of the date of this report. The initial purchase price of $0.2 million represents $5.0 million cash consideration net of $4.8 million in pre-acquisition inter-company payables to ZFB that was preliminarily

deemed settled upon acquisition; the accounting for the pre-existing relationship is still under evaluation. The preliminary allocation of the purchase price consisted of (1) $8.5 million of fair value of tangible assets acquired, (2) $5.5 million of liabilities assumed, and (3) $1.9 million of goodwill and intangibles. The fair value of non-controlling interest of $4.8 million at acquisition date was derived from the $5.0 million consideration paid for the 51% equity interest in ZFB, which was preliminarily deemed to approximate the fair value. The preliminary purchase price allocation falls within the measurement period and therefore the Company may adjust these provisional amounts to reflect new information obtained about facts and circumstances that existed as of the acquisition date.

Acquisition of Virex

On February 1, 2022, the Company completed the acquisition of Virex Health, Inc. (“Virex”), a developer of at-home diagnostic platforms based in Boston, Massachusetts. In accordance with Accounting Standards Codification Topic 805, the Company recorded consideration transferred totaling $11.4 million, including $6.8 million in cash, $0.1 million in transaction costs paid in cash and 1,281,662 shares of the Company's common stock, or $4.5 million of consideration based on the Company's closing share price on February 1, 2022. In connection with the acquisition of Virex, the Company may pay up to $10.0 million in contingent consideration in a combination of cash and stock subject to the achievement of certain regulatory milestones.

The transaction was accounted for as an asset acquisition since substantially all the value of the gross assets was concentrated in a single asset. No contingent consideration was recorded as of June 30, 2022. The Company fully expensed an amount of $11.7 million, representing the consideration transferred, net of short-term liabilities assumed, to acquired IPR&D.

2021 Acquisitions

Acquisition of ACEA

On June 1, 2021, the Company completed the acquisition of ACEA, which is developing multiple clinical and preclinical-stage new chemical entity compounds, including the late clinical drug candidate, Abivertinib. The final purchase price allocation was calculated based on an upfront consideration of $44.1 million, which was based on the Company’s closing share price on June 1, 2021, and resulted in separate and distinct intangible assets comprised of acquired IPR&D of $190.8 million, of which $90.8 million associated with Abivertinib for the treatment of hospitalized COVID-19 patients was deemed impaired and written off during the second quarter of 2022 (see Note 5 for details), goodwill of $36.0 million, fair value of debt assumed of approximately $32.1 million, deferred tax liabilities of $31.4 million and other net assets of approximately $2.9 million. Pursuant to the terms of the merger agreement entered into with ACEA, a portion of the upfront consideration equal to $38.1 million was used to repay certain existing indebtedness of ACEA, which amount was paid to the holders thereof in the form of shares of common stock of the Company and an aggregate of 5.5 million shares (“Indebtedness Shares”) of the Company’s common stock were issued in respect thereof based on a price per share equal to $6.8955. The Indebtedness Shares are subject to a true-up, as set forth in the merger agreement entered into with ACEA, if the price at which such shares were issued is greater than the closing price of the Company’s common stock on the date that is six months after June 1, 2021. The Company recorded $7.5 million associated with the true-up as a current liability at June 30, 2022.

In addition to the Closing Consideration, the Company may pay the ACEA equityholders contingent consideration of (i) up to $450.0 million in additional payments, subject to the receipt of certain regulatory approvals and achievement of certain net sales targets with respect to the assets acquired from ACEA and (ii) five to ten percent of the annual net sales on specified royalty-bearing products. See Note 3 for details.