M&A

Getting to work on pipeline construction, new Ipsen CEO forges $1B deal to buy Merrimack’s struggling Onivyde

Ipsen CEO David Meek

Merrimack Pharmaceuticals and Ipsen, two biotechs looking to reorganize and move up in the world, have struck a billion-dollar deal for a floundering cancer therapy. The Paris-based Ipsen is handing over $575 million in cash and promising up to $450 million in milestones to grab Merrimack’s US rights to Onivyde, approved for pancreatic cancer. And new Ipsen CEO David Meek tells Endpoints that you can expect more deals to come.

Ipsen gets Merrimack’s $MACK only marketed drug just a few months after the Boston-based biotech ousted its CEO following its lackluster debut, which provided only marginal improvements on survival rates for advanced pancreatic cancer patients. The French biotech also adds Merrimack’s commercial ops in the US as well as manufacturing. And it lines up the fast-growing Shire as a partner, which has been handling ex-US marketing on the drug.

Onivyde earned only $14.5 million in the third quarter, net, leaving analysts unhappy with Merrimack’s progress and prospects. But Ipsen’s Meek, who took over seven months ago — after Shire acquired Baxalta, where he had been president of oncology — sees this deal as a great chance to add to its presence in Cambridge, MA as well as the US market, feeding into their work to market Somatuline. And there’s potential upside in several ongoing studies aimed at expanding its use.

“For us the sweet spot is gaining a marketed product in oncology,” Meek tells me. It’s a “great deal” just for the current indication in pancreatic cancer, he adds, where Onivyde is the only approved drug in a post-gemcitabine setting.

Sources close to the deal tell me that the deal gives Merrimack the money it needs to complete its restructuring and refocus for a three-year stretch, with plans for a $1.54 dividend, paying off $175 million in notes and reinvesting in its three top remaining clinical stage efforts for MM-121, MM-141 and MM-310. MM-302, which failed a recent study, is being shelved.

The deal is worth $5 a share, says the source, for stock that closed Friday at $3.60, which gave Merrimack a market cap of $466 million — significantly less than the upfront in the deal. And the cash funds operations going forward into H2 2019, giving the company time to provide solid data on the three key drugs in the pipeline.

“There had to be a process to narrow the best path forward,” says the source.  “Obviously the drug hasn’t performed as well as hoped,” but this drug provides “maximum value” for the next stage of development as it goes back to being an R&D-stage biotech.

In a release out Sunday evening, Merrimack noted: “The milestones are composed of: $225 million for U.S. Food and Drug Administration (“FDA”) approval in first-line pancreatic cancer, $150 million for FDA approval in small cell lung cancer and $75 million for FDA approval in any third indication.” All of that money will be returned to shareholders.

Whatever the motivation to sell, Meek is happy to be on the buying end. There’s a Phase II study planned for Onivyde on first-line pancreatic cancer use, which can run straight into Phase III. Another mid-stage effort is underway for small cell lung cancer and an early stage study for breast cancer.

“The upside,” Meek says, “is pure upside.”

Meek says that he’s just getting started. He’s planning on adding more drug deals to beef up a pipeline in oncology, neuroscience and rare diseases.

“We’re trying to globalize our business,” says the CEO. “We want an even bigger presence in the US than where we are today.”

For starters, the deal will involve adding about 100 Merrimack staffers to Ipsen’s payroll, which currently accounts for about 4,500 employees globally. And Meek says the pact will add to the 100 staffers on site in Cambridge, MA, one of three R&D sites the company has, including operations in London/Oxford and Paris.

The FDA approved Onivyde back in the fall of 2015 as a second-line treatment. Patients treated with Onivyde plus fluorouracil/leucovorin lived an average of 6.1 months, compared to 4.2 months for those treated with only fluorouracil/leucovorin. There was no survival improvement for those who received only Onivyde compared to those who received fluorouracil/leucovorin.

Ipsen is partnered with Exelixis on cabozantinib, handling the ex-US sales of the drug.

For Merrimack, the sale comes just weeks after its lead experimental drug, MM-302, failed for breast cancer in a clinical study. Merrimack cut 22% of its work force in October as Robert Mulroy, who championed Onivyde and touted its future, stepped out of the company. With this latest reorganization, Merrimack will be left with 80 staffers, down about 320 from the payroll it supported in October 2016.


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