Still Stuck Below IPO Price, Merrimack Restructures, CEO Resigns

Xconomy Boston — 

In the four years since going public, Merrimack Pharmaceuticals has brought its first drug to market, a treatment for pancreatic cancer. But disappointing sales, mounting losses, and a sagging share price have triggered sweeping changes at the Cambridge, MA, company.

Merrimack president and CEO Robert Mulroy is resigning, effective immediately, as a result of a restructuring announced this morning. A regulatory filing shows that Mulroy will get a one-time bonus payment of $154,271 as part of a severance package, plus consulting fees through late 2019.

The company is also making a host of job cuts, shedding 22 percent of its workforce to shave more than $200 million in costs over the next two years. The job cuts won’t affect Merrimack’s commercial team. Merrimack had 426 full-time employees as of January, and 277 of them were involved in research, development, and manufacturing, according to its latest annual report.

Merrimack chairman Gary Crocker has been named interim president and CEO while the company begins a search for a new head executive.

Merrimack last October won FDA approval of its first product, a nanoparticle cancer drug sold as Onivyde—which delivers the chemo drug irinotecan—for patients whose pancreatic cancer hasn’t responded to prior therapies. Merrimack’s drug was approved based on a study showing it helped extend patients’ lives about two months, and it is priced at an average of $43,000 per patient. Some analysts expected the drug to peak at around $400 million in U.S. sales. (It’s currently under review in Europe.)

But the FDA approved Onivyde with a warning about some of its side effects, and the drug’s launch hasn’t met expectations so far. Merrimack netted $12.9 million in sales from the drug over the last reported quarter, short of consensus estimates of over $16.3 million, compared with $10 million in net sales the previous quarter. Cowen analyst Eric Schmidt wrote in a research note at the time that the latest results suggested the market for Merrimack’s drug was either “smaller than we had modeled, or… Merrimack’s commercial efforts are not having the desired impact.”

Merrimack (NASDAQ: MACK) lost $50.8 million in the last quarter, and its share price of $6.09 this morning is lower than the $7 its shares sold for in Merrimack’s March 2012 IPO. Shares closed at an all-time high of $13.42 in April 2015.

In a statement, Crocker called a boosted stock price “as intense a focus for Merrimack” as its R&D. “The board is convinced that there is tremendous inherent value within Merrimack that can be unlocked,” he said.

Merrimack CFO and clinical development head Yasir Al-Wakeel said the company will now focus on drugs with “the greatest potential for disruptive change” in the diagnosis and treatment of cancer, though he didn’t provide any specifics. Merrimack is also testing Onivyde in newly diagnosed pancreatic cancer patients, and has other drugs in development for breast, lung, and other cancers.

Check out this story for more on Merrimack, its founding technology, and its approach to developing cancer drugs.