Merrimack Pharma (MACK) to Undertake Major Corporate Restructuring; Will Cut Workforce by ~22%

October 3, 2016 7:16 AM EDT
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Merrimack Pharmaceuticals, Inc. (Nasdaq: MACK) 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. "The Board is committed to focusing our resources. This major restructuring will allow us to strategically align our pipeline with our core capabilities and prioritize ongoing clinical development efforts while improving our financial flexibility," stated Mr. Crocker. "We believe this sharper focus will drive efficiency and innovation and promote the interests of not only our shareholders and employees, but also of cancer patients worldwide. The realization of shareholder value will become as intense a focus for Merrimack as our strength in innovation and development. The Board is convinced that there is tremendous inherent value within Merrimack that can be unlocked."

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. "We are grateful to Bob and acknowledge his leadership of Merrimack over the years," said Mr. Dineen.

The reduction in personnel will not impact the commercial team or the execution of ONIVYDE's commercial launch and label expansion. "This strategic shift is designed to align our resources with the programs that have the greatest potential for disruptive change in the diagnosis and treatment of cancer, as well as to significantly increase our financial flexibility," said Dr. Yasir Al-Wakeel, CFO and Head of Corporate Development. He adds, "With the elimination of more than $200 million in expected expenses through research and development efficiencies, prioritization and cost containment over the next two years, today's announcement places Merrimack in a much stronger financial position." As a result, 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. A table reconciling guidance for aggregate research and development and selling, general and administrative expenses, excluding anticipated milestone obligations 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.

The reduction in force was substantially completed on October 3rd and is expected to be fully completed by December 3rd. More information on the restructuring will be available in the Form 8-K to be filed by Merrimack today. Merrimack plans to provide more financial and strategic details regarding the conclusion of this product prioritization process by the end of the fourth quarter.

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