On March 1, 2017 Merrimack Pharmaceuticals, Inc. (NASDAQ: MACK) reported its fourth quarter and full year 2016 financial results for the period ended December 31, 2016 (Press release, Merrimack, MAR 1, 2017, View Source [SID1234517915]). Schedule your 30 min Free 1stOncology Demo! Key Recent Events
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As announced on January 8, 2017, Merrimack entered into an asset purchase and sale agreement with Ipsen S.A. under which Merrimack will sell ONIVYDE and its generic version of doxorubicin hydrochloride (HCI) liposome injection to Ipsen for up to $1.025 billion, plus up to $33.0 million in net milestone payments retained by Merrimack pursuant to Merrimack’s license and collaboration agreement with Shire. A special meeting of Merrimack’s stockholders is scheduled for March 30, 2017 to consider and vote on the asset sale. Merrimack anticipates completing the asset sale shortly after approval of the asset sale at the special meeting.
Merrimack also announced on January 8, 2017 the conclusion of a comprehensive pipeline review by its Board of Directors, which resulted in the identification of the three most promising clinical programs to focus its development efforts on going forward: MM-121, MM-141 and MM-310.
Merrimack appointed Dr. Richard Peters as President and Chief Executive Officer, effective February 6, 2017. Dr. Peters succeeded Gary Crocker, Chairman of the Board, who was serving as Interim President and Chief Executive Officer prior to Dr. Peters’ appointment.
"This is an exciting and important time for Merrimack as we are refocusing into an earlier-stage, R&D-focused biopharmaceutical company," said Dr. Peters. "The transaction with Ipsen, once completed, will allow for the immediate return of cash to stockholders, while also providing Merrimack with an infusion of capital that we believe will fund our streamlined oncology pipeline into the second half of 2019. We are confident that our clinical stage assets have the potential to benefit cancer patients around the world and drive Merrimack’s long-term success and stockholder value creation."
Fourth Quarter and Full Year 2016 Financial Results
The following summarizes Merrimack’s financial results from the year ended December 31, 2016:
Aggregate research and development and selling, general and administrative expenses for the year ended December 31, 2016, when calculated in accordance with GAAP, were $241.6 million. This amount includes $35.5 million of milestone payments made to PharmaEngine. This corresponds to aggregate research and development and selling, general and administrative expenses, excluding milestone payments to PharmaEngine, a non-GAAP financial measure, of $206.1 million for the year ended December 31, 2016. As a result of Merrimack’s various cost control measures, these amounts are within the lowered GAAP and non-GAAP guidance ranges previously provided by Merrimack;
Product revenues from the commercial sale of ONIVYDE, net of discounts, allowances and reserves, were $53.1 million for the year ended December 31, 2016, compared to $4.3 million for the year ended December 31, 2015;
License and collaboration revenues were $87.1 million for the year ended December 31, 2016, compared to $85.0 million for the year ended December 31, 2015. This amount includes $40.0 million of substantive milestones achieved during the year ended December 31, 2016 under Merrimack’s license and collaboration agreement with Shire, compared to $20.0 million of substantive milestones achieved under this collaboration during the year ended December 31, 2015;
Restructuring expenses were $5.9 million for the year ended December 31, 2016 and were related to the previously-announced 22% reduction in headcount that occurred in October 2016 as part of a major corporate restructuring with the objective of prioritizing Merrimack’s research and development on a focused set of systems biology-derived oncology products and strengthening its financing runway;
Interest expense was $43.6 million for the year ended December 31, 2016, compared to $19.2 million for the year ended December 31, 2015. This $24.4 million increase was primarily due to a $14.6 million one-time, non-cash loss related to the conversion of an aggregate principal amount of $64.2 million of Merrimack’s convertible notes in April 2016 as well as interest incurred on its senior secured notes that were issued in December 2015; and
Net loss attributable to Merrimack for the year ended December 31, 2016 was $151.7 million, or $1.21 per share, compared to a net loss attributable to Merrimack of $148.0 million, or $1.33 per share, for the year ended December 31, 2015.
The following summarizes Merrimack’s financial results from the quarter ended December 31, 2016:
Product revenues from the commercial sale of ONIVYDE, net of discounts, allowances and reserves, were $15.8 million for the quarter ended December 31, 2016, compared to $14.5 million for the quarter ended September 30, 2016. This represents an increase of $1.3 million, or 9%, over the prior quarter;
License and collaboration revenues were $44.1 million for the quarter ended December 31, 2016, compared to $12.4 million for the quarter ended September 30, 2016. This $31.7 million increase is primarily due to the achievement of $30.0 million of substantive milestones during the fourth quarter under Merrimack’s license and collaboration agreement with Shire;
Aggregate research and development and selling, general and administrative expenses for the quarter ended December 31, 2016, when calculated in accordance with GAAP, were $79.2 million compared to $50.1 million for the quarter ended September 30, 2016. This represents an increase of $29.1 million, or 58%. The majority of this increase was related to $25.5 million of milestone payments owed to PharmaEngine in the fourth quarter of 2016;
Restructuring expenses were $5.0 million for the quarter ended December 31, 2016; and
Net loss attributable to Merrimack for the quarter ended December 31, 2016 was $32.4 million, or $0.25 per share, compared to a net loss attributable to Merrimack of $30.1 million, or $0.23 per share, for the quarter ended September 30, 2016.
A table reconciling aggregate research and development and selling, general and administrative expenses, excluding milestone payments to PharmaEngine, a non-GAAP financial measure, to aggregate research and development and selling, general and administrative expenses calculated in accordance with GAAP is included at the end of this press release.
2017 Financial Outlook
Upon the closing of the asset sale, Merrimack will receive a $575.0 million upfront cash payment from Ipsen (subject to a working capital adjustment as provided in the asset purchase and sale agreement). Merrimack expects to use these proceeds to declare and pay a special cash dividend of at least $200.0 million to stockholders and use an additional $195.1 million to redeem its senior secured notes. Additionally, if the asset sale is consummated and certain milestones are met with Shire, Merrimack expects to receive up to an aggregate of $33.0 million in net milestone payments in 2017. Merrimack believes that these potential cash inflows, along with the completion of the headcount reduction and refocused research and development efforts that were announced in January 2017, will provide financial resources sufficient to fund its operations into the second half of 2019.