Merrimack Pharmaceuticals Inc

The Sale Of Onivyde Rights By Merrimack Pharmaceuticals Inc (NASDAQ:MACK) Will Cost Ipsen SA(EPA:IPN) $1Billion

Onivyde and generic Doxil are just some of the few oncology assets that Merrimack Pharmaceuticals Inc (NASDAQ:MACK) Inc will be disposing to France-based Ipsen SA (EPA:IPN). The definitive asset purchase and sale agreement is worth $1.025 billion and will come along with milestone payment of up to $33 million. The terms of sale dictate that Merrimack retains the marketing rights for Onivyde in the US. It will also agree to a licensing agreement with Shire SHPG while PharmaEngine, which is a Taiwanese firm, will own the marketing rights in Taiwan.

Justifying the decision as a key strategic move

According to Merrimack’s chairman and CEO Gary Crocker, the move is expected to help in the maximization of value for stockholders. The primary focus will be on MM-121, MM-141, and MM-310 candidates, more often than not distinguished as programs with the higher success probability versus higher returns on investment.

The company intends to allocate $125 million of the $575 million received to develop its aforementioned three pipeline candidates.  At the same time, Merrimack will also discontinue the phase I study on MM-151 besides deferring continued investment in various preclinical programs not until it can identify reliable partners and funding.

Onivyde, which is treatment for patients with metastatic adenocarcinoma of the pancreas, was the only marketed product in Merrimack’s portfolio. This means that the company was heavily relying on it for growth. But nonetheless, successful development of other candidates is equally important for future growth prospects.

The restructuring initiative will be beneficial

Apparently, it has not been rock and roll for Merrimack in the recent past. This is the more reason that it had to reduce its headcount by 22% in an effort to strengthen its cash runway. The company also undertook a restructuring initiative in 2016, which is expected to provide a leaner operating expense structure.

From 400 employees prior to implementing the new restructure, Merrimack will now have only 80 employees.  Through a special dividend of $1.54 per outstanding share, its shareholders will get approximately $200 million but at the same time, the company must pay $175 million of outstanding debt due in 2022.

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