In a deal that could earn the Cambridge, Mass.-based pharmaceutical company over $1.03 billion, Merrimack Pharmaceuticals (NSDQ:MACK) said yesterday that it is selling its liposome injection cancer drugs, Onivyde and generic Doxil, to Ipsen (EPA:IPN). Merrimack is also slashing its employee headcount down to just 80 people, after laying off 22% of its 400 employees last October. As a part of the restructuring, the company will focus on its non-small cell lung cancer drug MM-121, metastatic pancreatic cancer program MM-141 and its antibody-directed nanotherapeutic MM310.
According to the deal, Merrimack will receive $575 million in cash as upfront payment and up to $450 million in additional milestone payments based on regulatory approvals. The pharmaceutical company could also earn up to $33 million in payments from its exclusive licensing agreement with Shire for the development and commercialization of Onivyde.
Merrimack said it plans to the use the $575 million payment to invest in the company’s oncology pipeline and fund itself into the 2nd half of 2019, as well as pay off the $175 million in outstanding senior secured notes that are due in 2022 and assemble its capital structure as a development stage biopharmaceutical company. The company will also return at least $200 million to its stockholders through a special cash dividend, equating to $1.54 per outstanding share of common stock.
“The agreement to sell Onivyde and generic Doxil, and our decision to focus on MM-121, MM-141 and MM-310, conclude a comprehensive process that our Board conducted to maximize value for stockholders and confirms the strength of our technology and the power of systems biology,” chairman, interim president & CEO Gary Crocker said in prepared remarks. “With this transformative step, Merrimack is moving forward as a more focused research and development company targeting three clinical stage assets with outstanding value potential. The transaction proceeds will allow Merrimack to realign its capital structure and fund the pipeline into the second half of 2019, as well as return cash to stockholders in the form of the special dividend. This strategic transaction also enhances stockholder value by providing sufficient, non-dilutive capital to fund our new, strongly-focused clinical objectives for MM-121, MM-141 and MM-310, and to participate in the potential upside of expected value-inflection points from each targeted program. We are confident that the actions we are taking are the best way to deliver innovative oncology treatments for cancer patients, while creating value for stockholders.”
“Through the transaction announced today, we are streamlining our operating structure to significantly reduce operating expense, while bolstering our capital structure through an infusion of cash and the extinguishment of the Senior Secured Notes,” CFO & head of corporate development Dr. Yasir Al-Wakeel added. “Going forward, we will have a more focused capital allocation program dedicated to advancing MM-121, MM-141 and MM-310. With the multi-year cash runway provided by this transaction, Merrimack will have ample resources to fund its development programs into the second half of 2019, by which time we expect to have additional data regarding the viability of MM-121, MM-141 and MM-310.”
News of the deal gave MACK shares a boost, trading at $4.06 apiece in mid-morning trading, up 13.1%.