Type of information: Restructuring
Company: Merrimack Pharmaceuticals (USA - MA)
Therapeutic area: Cancer - Oncology
Type agreement: restructuring
- • On October 3, 2016, Merrimack Pharmaceuticals announced a major corporate restructuring with the objective of prioritizing its research and development on a focused set of systems biology-derived oncology products and strengthening its financial runway. As part of this move, Merrimack is immediately implementing a 22% reduction in headcount and eliminating more than $200 million in expected costs over the next two years. In line with this restructuring, the Board of Directors has accepted the resignation of President and CEO Robert Mulroy , effective immediately. In order to accelerate this change, the Board of Directors has appointed Chairman of the Board Gary Crocker as interim President and CEO. In line with delivering the new goals of innovation and efficiency, John Dineen , Chairman of the Organization and Compensation Committee and former CEO of GE Healthcare , will lead the CEO search process. The reduction in personnel will not impact the commercial team or the execution of Onivyde®'s commercial launch and label expansion.
- Merrimack now anticipates aggregate research and development and selling, general and administrative expenses in 2017 of approximately $190 million when calculated in accordance with GAAP, resulting in a cash runway that is expected to fund operations for at least the next 12 months based on cash on hand, anticipated near term milestones and reimbursements and Onivyde® profits. This corresponds to a non-GAAP financial measure of $165 million of aggregate research and development and selling, general and administrative expenses in 2017 when excluding $25 million of anticipated milestone obligations to PharmaEngine, which are fully offset by corresponding milestone achievement obligations from Shire.
The reduction in force was substantially completed on October 3rd and is expected to be fully completed by December 3rd.
- • On April 3, 2017, Merrimack Pharmaceuticals announced that it has commenced operating as a new, refocused research and clinical development company in connection with the completion of its previously announced transaction with Ipsen. With the completion of the Ipsen transaction, Merrimack is now prioritizing three clinical programs:
MM-121 (seribantumab) is a first-in-class fully human monoclonal antibody that binds to the HER3 receptor and targets heregulin positive cancers. Merrimack is currently conducting the Phase 2 randomized SHERLOC study evaluating MM-121 in HRG+ non-small cell lung cancer patients in combination with docetaxel or pemetrexed and plans to initiate another Phase 2 randomized study this year in Her2 negative, hormone receptor, and heregulin positive breast cancer patients.
MM-141 (istiratumab) is a bispecific tetravalent antibody and a potent inhibitor of the PI3K/AKT/mTOR pathway by targeting IGF1-R and HER3. Currently, Merrimack is conducting the CARRIE study, a Phase 2 randomized trial evaluating MM-141 in previously untreated metastatic pancreatic cancer patients with high levels of free IGF1 in combination with nab-paclitaxel and gemcitabine.
MM-310 is an antibody-directed nanotherapeutic (ADN) that contains a novel prodrug of docetaxel and targets the EphA2 receptor, which is highly expressed in most solid tumor types. MM-310 was designed to improve the therapeutic window of docetaxel in major oncology indications, such as prostate, ovarian, bladder, gastric, pancreatic and lung cancers. A first-in-human Phase 1 study to evaluate safety and preliminary activity of MM-310 was initiated in the first quarter of 2017.
Merrimack intends to use the $575 million upfront payment, to invest $125 million to its streamlined oncology pipeline such that Merrimack will be able to fund itself into the second half of 2019.
The company will extinguish the $175 million in outstanding Senior Secured Notes due in 2022, plus approximately $20 million of costs associated with the redemption.
Merrimack will also return $140 million to its stockholders through a special cash dividend, which equates to approximately $1.54 per outstanding share of common stock.
- • On January 8, 2017, Merrimack also announced the completion of its previously announced strategic pipeline review resulting in the identification of the three most promising clinical programs to focus its development efforts on going forward. In assessing the clinical and financial prioritization of its programs, Merrimack determined that MM-121, MM-141 and MM-310 are the programs with the highest probability of success and the highest return on investment. As a result of the transaction with Ipsen, the refocused pipeline and the previously implemented restructuring initiatives announced in October 2016 , Merrimack will have a significantly reduced operating expense structure and a capital structure that is appropriately aligned with the Company's new focus. Upon completing the Ipsen transaction and refocusing effort, the Company will have approximately 80 employees; this represents a reduction of 80% from approximately 400 employees prior to implementing the restructuring in October 2016 .
The Board of Directors plans to approve the special cash dividend after the closing of the transaction, and Merrimack expects it will be paid soon thereafter. The Company will announce a record date and ex-dividend date in due course.
Merrimack will also return to its stockholders 100% of the amounts received of the up to $450 million in additional regulatory approval-based milestone payments for additional indications for Onivyde® in the U.S. , net of taxes owed related to the receipt of these milestones. Prior to any tax impact, gross proceeds for achieving these milestones equates to approximately $3.46 per outstanding share of common stock, based on the number of Merrimack outstanding shares today. The milestones are composed of: $225 million for FDA approval in first-line pancreatic cancer, $150 million for FDA approval in small cell lung cancer and $75 million for FDA approval in any third indication.