10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-35409

 

Merrimack Pharmaceuticals, Inc.

 

(Exact name of registrant as specified in its charter)

 

Delaware

04-3210530

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

 

One Broadway, 14th Floor

Cambridge, MA

02142

(Address of principal executive offices)

(Zip Code)

 

(617) 720-8606

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.01 par value

MACK

Nasdaq Global Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of November 1, 2022, there were 13,410,243 shares of Common Stock, $0.01 par value per share, outstanding.

 

 


 

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

 

 

 

Page

Item 1.

Financial Statements.

2

 

 

 

 

Condensed Consolidated Balance Sheets – September 30, 2022 and December 31, 2021 (unaudited)

2

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss – Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)

3

 

 

 

 

Condensed Consolidated Statements of Stockholders’ Equity – September 30, 2022 and 2021 (unaudited)

4

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2022 and 2021 (unaudited)

5

 

 

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

10

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

15

 

 

 

Item 4.

Controls and Procedures.

15

 

PART II

OTHER INFORMATION

 

Item 1A.

Risk Factors.

16

 

 

 

Item 6.

Exhibits.

17

 

 

Signatures

18

 

 

 

i


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

our rights to receive payments related to the milestone events under the asset purchase and sale agreement with Ipsen S.A. when expected or at all;
our rights to receive payments related to the milestone events under the asset purchase agreement with Elevation Oncology, Inc. (formerly known as 14ner Oncology, Inc.), when expected or at all;
our intellectual property position;
our cash runway and the sufficiency of our financial resources to fund our operations;
our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;
our plans to seek to divert our remaining product candidates; and
other risks detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), press releases and other communications, including those set forth under “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021, and in the documents incorporated by reference herein and therein.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments that we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

NOTE REGARDING TRADEMARKS

ONIVYDE® is a trademark of Ipsen S.A. Any other trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q are the property of their respective owners.

1


 

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

Merrimack Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

 

(in thousands, except per share amounts)

 

September 30,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

13,091

 

 

$

14,203

 

Prepaid expenses and other current assets

 

 

537

 

 

 

480

 

Total current assets

 

 

13,628

 

 

 

14,683

 

     Other assets

 

 

9

 

 

 

66

 

Total assets

 

$

13,637

 

 

$

14,749

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable, accrued expenses and other

 

$

448

 

 

$

562

 

Total current liabilities

 

 

448

 

 

 

562

 

Total liabilities

 

 

448

 

 

 

562

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value: 10,000 shares authorized at September 30, 2022 and
   December 31, 2021;
no shares issued or outstanding at September 30, 2022 or
   December 31, 2021

 

 

 

 

 

 

Common stock, $0.01 par value: 30,000 shares authorized at September 30, 2022 and
   December 31, 2021;
13,410 shares issued and outstanding at September 30, 2022 and
   December 31, 2021

 

 

1,334

 

 

 

1,334

 

Additional paid-in capital

 

 

558,999

 

 

 

558,945

 

Accumulated deficit

 

 

(547,144

)

 

 

(546,092

)

Total stockholders’ equity

 

 

13,189

 

 

 

14,187

 

Total liabilities and stockholders’ equity

 

$

13,637

 

 

$

14,749

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

2


 

Merrimack Pharmaceuticals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

(in thousands, except per share amounts)

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

$

504

 

 

$

619

 

 

$

1,567

 

 

$

2,143

 

Gain on sale of assets

 

 

 

 

 

(94

)

 

 

(445

)

 

 

(144

)

Total operating expenses

 

 

504

 

 

 

525

 

 

 

1,122

 

 

 

1,999

 

Loss from operations

 

 

(504

)

 

 

(525

)

 

 

(1,122

)

 

 

(1,999

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

62

 

 

 

 

 

 

70

 

 

 

19

 

Total other income

 

 

62

 

 

 

 

 

 

70

 

 

 

19

 

Net loss and comprehensive loss

 

$

(442

)

 

$

(525

)

 

$

(1,052

)

 

$

(1,980

)

Net loss per common share - basic and diluted

 

$

(0.03

)

 

$

(0.04

)

 

$

(0.08

)

 

$

(0.15

)

Weighted-average common shares used to compute basic and
   diluted net loss per common share

 

 

13,410

 

 

 

13,410

 

 

 

13,410

 

 

 

13,406

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


 

Merrimack Pharmaceuticals, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Accumulated
Deficit

 

 

Total
Stockholders’
Equity

 

Balance at December 31, 2021

 

 

13,410

 

 

$

1,334

 

 

$

558,945

 

 

$

(546,092

)

 

$

14,187

 

Stock-based compensation

 

 

 

 

 

 

 

 

20

 

 

 

 

 

 

20

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(132

)

 

 

(132

)

Balance at March 31, 2022

 

 

13,410

 

 

 

1,334

 

 

 

558,965

 

 

 

(546,224

)

 

 

14,075

 

Stock-based compensation

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

17

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(478

)

 

 

(478

)

Balance at June 30, 2022

 

 

13,410

 

 

 

1,334

 

 

 

558,982

 

 

 

(546,702

)

 

 

13,614

 

Stock-based compensation

 

 

 

 

 

 

 

 

17

 

 

 

 

 

 

17

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(442

)

 

 

(442

)

Balance at September 30, 2022

 

 

13,410

 

 

$

1,334

 

 

$

558,999

 

 

$

(547,144

)

 

$

13,189

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Shares

 

 

Amount

 

 

Additional
Paid-In
Capital

 

 

Accumulated
Deficit

 

 

Total
Stockholders’
Equity

 

Balance at December 31, 2020

 

 

13,380

 

 

$

1,334

 

 

$

558,309

 

 

$

(543,637

)

 

$

16,006

 

Exercise of stock options

 

 

30

 

 

 

 

 

 

239

 

 

 

 

 

 

239

 

Stock-based compensation

 

 

 

 

 

 

 

 

208

 

 

 

 

 

 

208

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(696

)

 

 

(696

)

Balance at March 31, 2021

 

 

13,410

 

 

 

1,334

 

 

 

558,756

 

 

 

(544,333

)

 

 

15,757

 

Stock-based compensation

 

 

 

 

 

 

 

 

93

 

 

 

 

 

 

93

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(759

)

 

 

(759

)

Balance at June 30, 2021

 

 

13,410

 

 

 

1,334

 

 

 

558,849

 

 

 

(545,092

)

 

 

15,091

 

Stock-based compensation

 

 

 

 

 

 

 

 

53

 

 

 

 

 

 

53

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(525

)

 

 

(525

)

Balance at September 30, 2021

 

 

13,410

 

 

$

1,334

 

 

$

558,902

 

 

$

(545,617

)

 

$

14,619

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

Merrimack Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(1,052

)

 

$

(1,980

)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities

 

 

 

 

 

 

Gain on sale of in-process research and development

 

 

(445

)

 

 

(144

)

Stock-based compensation expense

 

 

54

 

 

 

354

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(57

)

 

 

1,870

 

Accounts payable, accrued expenses and other

 

 

(114

)

 

 

(87

)

Other assets

 

 

57

 

 

 

124

 

Net cash (used in) provided by operating activities

 

 

(1,557

)

 

 

137

 

Cash flows from investing activities

 

 

 

 

 

 

Net proceeds from sale of in process research and development

 

 

445

 

 

 

144

 

Net cash provided by investing activities

 

 

445

 

 

 

144

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

 

 

 

239

 

Net cash provided by financing activities

 

 

 

 

 

239

 

Net (decrease) increase in cash and cash equivalents

 

 

(1,112

)

 

 

520

 

Cash and cash equivalents, beginning of period

 

 

14,203

 

 

 

14,038

 

Cash and cash equivalents, end of period

 

$

13,091

 

 

$

14,558

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

Merrimack Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

 

1. Nature of the Business

Merrimack Pharmaceuticals, Inc. (the “Company”) is a biopharmaceutical company based in Cambridge, Massachusetts that is entitled to receive up to $450.0 million in contingent milestone payments related to its sale of ONIVYDE® and MM-436 (the “Commercial Business”) to Ipsen S.A. (“Ipsen”) in April 2017 (the “Ipsen Sale”). The Company does not have any ongoing research or development activities. The Company does not have any employees and instead uses external consultants for the operation of the Company.

The $450.0 million in contingent milestone payments resulting from the Ipsen Sale consist of:

$225.0 million upon approval by the U.S. Food and Drug Administration (“FDA”) of ONIVYDE® for the first-line treatment of metastatic adenocarcinoma of the pancreas, subject to certain conditions;
$150.0 million upon approval by the FDA of ONIVYDE® for the treatment of small-cell lung cancer after failure of first-line chemotherapy; and
$75.0 million upon approval by the FDA of ONIVYDE® for an additional indication unrelated to those described above.

On May 30, 2019, the Company announced the completion of its review of strategic alternatives, following which the Company’s board of directors (the “Board”) implemented a series of measures designed to extend the Company’s cash runway and preserve its ability to capture the potential milestone payments resulting from the Ipsen Sale. In connection with that announcement, the Company discontinued the discovery efforts on its remaining preclinical programs: MM-401, an agonistic antibody targeting a novel immuno-oncology target, TNFR2; and MM-201, a highly stabilized agonist-Fc fusion protein targeting death receptors 4 and 5. The Company is seeking potential acquirers for its remaining preclinical and clinical assets.

The Company’s termination of its executive management team and all other employees was substantially completed by June 28, 2019 and fully completed by July 12, 2019. As a result, the Company has not had any employees since July 2019. The Company has engaged external consultants to run the day-to-day operations of the Company. The Company has also entered into consulting agreements with certain former members of its executive management team who are supporting the Company’s relationship with current partners, assisting with the potential sale of remaining preclinical and clinical assets, and assisting with certain legal and regulatory matters and the continued wind-down of operations.

On July 12, 2019, the Company completed the sale to Elevation Oncology, Inc. (formerly known as 14ner Oncology, Inc.) (“Elevation”) of its anti-HER3 antibody programs, MM-121 (seribantumab) and MM-111 (the “Elevation sale”). In connection with the Elevation sale, the Company received an upfront cash payment of $3.5 million. The Company is also eligible to receive up to $54.5 million in additional potential development, regulatory approval and commercial-based milestone payments, consisting of:

$3.0 million for achievement of the primary endpoint in the first registrational clinical study of either MM-121 or MM-111;
Up to $16.5 million in total payments for the achievement of various regulatory approval and reimbursement-based milestones in the United States, Europe and Japan; and
Up to $35.0 million in total payments for achieving various cumulative worldwide net sales targets between $100.0 million and $300.0 million for MM-121 and MM-111.

On March 27, 2020, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Celator Pharmaceuticals, Inc. (the “Buyer”), pursuant to which the Buyer agreed to purchase certain assets (the “Transferred Assets”) relating to certain of the Company’s preclinical nanoliposome programs (the “Transaction”). The Company and the Buyer completed the Transaction simultaneously with the execution of the Asset Purchase Agreement. Under the terms of the Asset Purchase Agreement, the Buyer paid to the Company a cash payment of $2.3 million and reimbursed the Company for $0.2 million related to certain specified expenses. The Company incurred $0.4 million expenses related to the Transaction.

On September 15, 2021, the Company entered into an Asset Purchase Option Agreement (the “Asset Purchase Option Agreement”) with a third party (the “Purchaser”), pursuant to which the Purchaser agreed to obtain an exclusive option (the “Option”), to purchase one of the Company’s preclinical programs with a consideration of $0.5 million. Under the terms of the Asset Purchase Option Agreement, the Purchaser paid to the Company the Option fee of $0.1 million. The Purchaser had the right to exercise the Option within 24 months from September 15, 2021. The Company recognized a gain of $0.1 million related to the Option fee payment

6


 

for the year ended December 31, 2021. On January 18, 2022, the Purchaser provided written notice to the Company of its intent to exercise such Option. On March 1, 2022 the Company and the Purchaser entered into the Asset Purchase Agreement. The consideration of $0.5 million was paid to the Company and a gain of $0.5 million was recognized in March 2022.

The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including, among other things, development by competitors of new technological innovations, protection of proprietary technology and compliance with government regulations, approval by the FDA and other foreign health agencies to approve any pharmaceutical under development, obtaining insurance reimbursement for any drug if and when approved by regulators, and its ability to secure additional capital to fund operations. None of the Company’s product candidates are approved for any indication by the FDA or any other regulatory agency. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies, among others. In addition, the Company is dependent upon the services of its external consultants for the operation of the Company. The Company’s business strategy depends substantially upon its ability to receive future milestone payments from Ipsen and Elevation. Any failure to achieve such milestones or a perception that the milestones may not be achieved will materially and adversely affect the Company and the value of its common stock.

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. As of September 30, 2022, the Company had an accumulated deficit of $547.1 million. During the nine months ended September 30, 2022, the Company incurred net loss of $1.1 million and used $1.6 million of cash in operating activities. The Company expects to continue to generate operating losses for the foreseeable future. The Company expects that its cash and cash equivalents of $13.1 million at September 30, 2022 will allow the Company to continue its operations into 2027, when the Company estimates the longest-term potential Ipsen milestone may be achieved. The continued viability of the Company beyond that point is dependent on its ability to realize milestone payments from its licensed product candidates, raise additional capital to finance its operations or to reduce operating expenses. There can be no assurance that the Company will be successful in receiving future milestone payments or able to obtain sufficient capital to cover its costs on acceptable terms, if at all.

The Company expects that it would seek to finance any future cash needs through a combination of divestitures of its product candidates or other assets, equity offerings and debt financings. There can be no assurance as to the timing, terms or consummation of any divestiture or financing, and the terms of any such financing may adversely affect the holdings or the rights of the Company’s stockholders or require the Company to relinquish rights to certain of its revenue streams or product candidates.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements reflect the operations of Merrimack Pharmaceuticals, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.

The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Unaudited Interim Financial Information

The condensed consolidated balance sheet as of December 31, 2021 was derived from audited financial statements for the year ended December 31, 2021, but does not include all disclosures required by GAAP. The condensed consolidated balance sheet as of September 30, 2022, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022 and 2021, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2022 and 2021 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2022 and 2021 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2022, the results of its operations for the three and nine months ended September 30, 2022 and 2021, its statements of stockholders’ equity for the three and nine months ended September 30, 2022 and 2021 and its statements of cash flows for the nine months ended September 30, 2022 and 2021. The financial data and other information disclosed in the notes related to the three and nine months ended September 30, 2022

7


 

and 2021 are unaudited. The results for the three and nine months ended September 30, 2022 and 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period.

The unaudited interim financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 9, 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates, assumptions and judgments reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

 

3. Fair Value of Financial Instruments

The following tables show assets measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021:

 

 

 

September 30, 2022

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

11,801

 

 

$

 

 

$

 

Totals

 

$

11,801

 

 

$

 

 

$

 

 

 

 

December 31, 2021

 

(in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

12,934

 

 

$

 

 

$

 

Totals

 

$

12,934

 

 

$

 

 

$

 

 

There were no liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021.

4. Accounts Payable, Accrued Expenses and Other

Accounts payable, accrued expenses and other as of September 30, 2022 and December 31, 2021 consisted of the following:

 

(in thousands)

 

September 30,
2022

 

 

December 31,
2021

 

Accounts payable

 

$

67

 

 

$

120

 

Accrued goods and services

 

 

119

 

 

 

167

 

Accrued clinical trial costs

 

 

71

 

 

 

84

 

Others

 

 

191

 

 

 

191

 

Total accounts payable, accrued expenses and other

 

$

448

 

 

$

562

 

 

5. Stock-Based Compensation

On April 15, 2021, the Company’s Board of Directors adopted the 2021 Incentive Award Plan (the “2021 Plan”) to replace the 2011 Stock Incentive Plan (the “2011 Plan”). The 2021 Plan was approved by the Company’s stockholders at the Company’s Annual Meeting of Stockholders held on June 10, 2021. The 2021 Plan is administered by the Company’s Board of Directors and permits the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards.

8


 

There were 22,000 options granted during each of the nine months ended September 30, 2022 and 2021 under 2021 Plan. There were no options granted during the three months ended September 30, 2022 and 2021. The weighted-average grant date fair value per share of stock options granted during the nine months ended September 30, 2022 and 2021 was $3.11 and $3.68, respectively. At September 30, 2022, there were 231,000 shares remaining available for grant under the 2021 Plan.

The fair value of stock options granted to employees during the three and nine months ended September 30, 2022 and 2021 was estimated at the date of grant using the following assumptions:

 

 

 

Three and Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

Risk-free interest rate

 

 

2.99

%

 

 

0.73

%

Expected dividend yield

 

0%

 

 

0%

 

Expected term

 

5.22 years

 

 

5.22 years

 

Expected volatility

 

68.02%

 

 

 

68.48

%

 

The Company recognized stock-based compensation expense of $17 thousand, $53 thousand, $54 thousand and $354 thousand in general and administrative expense during the three and nine months ended September 30, 2022 and 2021, respectively.

6. Net Loss Per Common Share

Basic net loss per share is calculated by dividing the net loss attributable to Merrimack Pharmaceuticals, Inc. by the weighted-average number of common shares outstanding during the period.

Diluted net loss per share is computed by dividing the net loss attributable to Merrimack Pharmaceuticals, Inc. by the weighted-average number of dilutive common shares outstanding during the period. Dilutive shares outstanding is calculated by adding to the weighted shares outstanding any potential (unissued) shares of common stock from outstanding stock options based on the treasury stock method. Outstanding stock options were not included in the diluted net loss per share calculation because the options were out of the money or to do so would have been antidilutive (i.e., the total proceeds upon exercise would have exceeded the market value of the underlying common shares). In a period when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods where a loss is reported, there is no difference in basic and dilutive loss per share.

Stock options are excluded from the calculation of diluted loss per share because the net loss for the three and nine months ended September 30, 2022 and 2021 causes such securities to be anti-dilutive. Outstanding options excluded from the calculation of diluted loss per share for the three and nine months ended September 30, 2022 and 2021 are shown in the chart below:

 

 

 

Three and Nine Months Ended September 30,

 

(in thousands)

 

2022

 

 

2021

 

Outstanding options to purchase common stock

 

 

1,628

 

 

 

1,778

 

 

7. Recent Accounting Pronouncements

 

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed above, the Company does not believe that the adoption of recently issued standards has or may have a material impact on the Company’s condensed consolidated financial statements or disclosures.

9


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes to those financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2021 included in our Annual Report on Form 10-K. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth in Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q, which are incorporated herein by reference, our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a biopharmaceutical company based in Cambridge, Massachusetts that is entitled to receive up to $450.0 million in contingent milestone payments related to our sale of ONIVYDE® to Ipsen S.A., or Ipsen, in April 2017 and up to $54.5 million in contingent milestone payments related to our sale of MM-121 and MM-111 to Elevation Oncology, Inc. (formerly known as 14ner Oncology, Inc.), or Elevation, in July 2019. We do not have any ongoing research or development activities and are seeking potential acquirers for our remaining preclinical and clinical assets. We do not have any employees and instead use external consultants for the operation of our company.

On April 3, 2017, we completed the sale of ONIVYDE® and MM-436 (the “commercial business”) to Ipsen (the “Ipsen sale”). In connection with the Ipsen sale, we are eligible to receive up to $450.0 million in additional regulatory approval-based milestone payments.

The remaining up to $450.0 million in potential milestone payments resulting from the Ipsen sale consist of:

$225.0 million upon approval by the U.S. Food and Drug Administration, or FDA, of ONIVYDE® for the first-line treatment of metastatic adenocarcinoma of the pancreas, subject to certain conditions;
$150.0 million upon approval by the FDA of ONIVYDE® for the treatment of small-cell lung cancer after failure of first-line chemotherapy; and
$75.0 million upon approval by the FDA of ONIVYDE® for an additional indication unrelated to those described above.

Our non-commercial assets, including our clinical and preclinical development programs, were not included in the Ipsen sale and remain assets of ours.

On May 30, 2019, we announced the completion of our review of strategic alternatives, following which our board of directors implemented a series of measures which we believe allow us to extend our cash runway into 2027 and preserve our ability to capture the potential milestone payments resulting from the Ipsen sale. We have based this estimate on assumptions that may prove to be wrong, and we could use our financial resources sooner than we currently expect. In connection with that announcement, we discontinued the discovery efforts on our remaining preclinical programs: MM-401, an agonistic antibody targeting a novel immuno-oncology target, TNFR2; and MM-201, a highly stabilized agonist-Fc fusion protein targeting death receptors 4 and 5. We are seeking potential acquirers for our remaining preclinical and clinical assets.

The termination of our executive management team and all other employees was substantially completed by June 28, 2019 and fully completed by July 12, 2019. As of July 12, 2019, we do not have any employees. We have engaged external consultants to run our day-to-day operations. We have also entered into consulting agreements with certain former members of our executive management team who are supporting our relationship with current partners, assisting with the potential sale of remaining preclinical and clinical assets, and assisting with certain legal and regulatory matters and the continued wind-down of operations.

On July 12, 2019, we completed the sale to Elevation, or the Elevation sale, of our anti-HER3 antibody programs, MM-121 (seribantumab) and MM-111. In connection with the Elevation sale, we received an upfront cash payment of $3.5 million and are eligible to receive up to $54.5 million in additional potential development, regulatory approval and commercial-based milestone payments, consisting of:

$3.0 million for achievement of the primary endpoint in the first registrational clinical study of either MM-121 or MM-111;
Up to $16.5 million in total payments for the achievement of various regulatory approval and reimbursement-based milestones in the United States, Europe and Japan; and
Up to $35.0 million in total payments for achieving various cumulative worldwide net sales targets between $100.0 million and $300.0 million for MM-121 and MM-111.

10


 

On March 27, 2020, we entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Celator Pharmaceuticals, Inc. (the “Buyer”), pursuant to which the Buyer agreed to purchase certain assets (the “Transferred Assets”) relating to certain of our preclinical nanoliposome programs (the “Transaction”). We completed the Transaction simultaneously with the execution of the Asset Purchase Agreement. Under the terms of the Asset Purchase Agreement, the Buyer paid to us a cash payment of $2.3 million and reimbursed us for $0.2 million related to certain specified expenses and to assume certain liabilities with respect to the Transferred Assets. We incurred $0.4 million expenses related to the Transaction.

On September 15, 2021, we entered into an Asset Purchase Option Agreement (the “Asset Purchase Option Agreement”) with a third party (the “Purchaser”), pursuant to which the Purchaser agreed to obtain an exclusive option (the “Option”), to purchase one of our preclinical programs with a consideration of $0.5 million. Under the terms of the Asset Purchase Option Agreement, the Purchaser paid to us the Option fee of $0.1 million. The Purchaser had the right to exercise the Option within 24 months from September 15, 2021. We recognized a gain of $0.1 million related to the Option fee payment for the year ended December 31, 2021. On January 18, 2022, the Purchaser provided written notice to us of its intent to exercise such Option. On March 1, 2022, we entered the Asset Purchase Agreement with the Purchaser. The consideration of $0.5 million was paid to us and a gain of $0.5 million was recognized in March 2022.

We previously devoted substantially all of our resources to our drug discovery and development efforts, including conducting clinical trials for our product candidates, protecting our intellectual property and providing general and administrative support for these operations. We have financed our operations primarily through private placements of convertible preferred stock, collaborations, public offerings of our securities, secured debt financings, sales of ONIVYDE® and the Ipsen sale.

As of September 30, 2022, we had unrestricted cash and cash equivalents of $13.1 million. We expect that our cash and cash equivalents as of September 30, 2022 will be sufficient to continue our operations into 2027, when we estimate the longest-term potential Ipsen milestone may be achieved.

As of September 30, 2022, we had an accumulated deficit of $547.1 million. Our net loss from our continuing operations was $1.1 million and $2.0 million for the nine months ended September 30, 2022 and 2021, respectively. We do not expect to have any research and development expenses going forward. We do not expect to be profitable from our continuing operations in the future.

Financial Operations Overview

General and administrative expenses

General and administrative expenses consist primarily of stock-based compensation expenses, legal, intellectual property, business development, finance, information technology, corporate communications and investor relations. Other general and administrative expenses include costs for board of director’s costs, insurance expenses, legal and professional fees, and accounting and information technology services fees.

Interest income

Interest income consists primarily of interest income associated with our money market fund.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which we have prepared in accordance with the rules and regulations of the Securities and Exchange Commission, or the SEC, and generally accepted accounting principles in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies and the methodologies and assumptions we apply under them have not materially changed since March 9, 2022, the date we filed our Annual Report on Form 10-K for the year ended December 31, 2021. For more information on our critical accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2021.

11


 

Results of Operations

Comparison of the three months ended September 30, 2022 and 2021

 

 

 

Three Months Ended
September 30,

 

(in thousands)

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

General and administrative expenses

 

$

504

 

 

$

619

 

Gain on sale of assets

 

 

 

 

 

(94

)

Total operating expenses

 

 

504

 

 

 

525

 

Loss from operations

 

 

(504

)

 

 

(525

)

Interest income

 

 

62

 

 

 

 

Net loss

 

$

(442

)

 

$

(525

)

General and administrative expenses

General and administrative expenses were $0.5 million for the three months ended September 30, 2022 compared to $0.6 million for the three months ended September 30, 2021, a decrease of $0.1 million, or 19%. This decrease was primarily attributable to the decrease in both stock-based compensation expense and consulting fees.

Gain on sale of assets

There was no gain on sale of assets for the three months ended September 30, 2022. Gain on sale of assets was $0.1 million for the three months ended September 30, 2021, attributable to the sale of certain of our preclinical programs to a third party.

Interest income

Interest income was $0.1 million for the three months ended September 30, 2022 and nil for the three months ended September 30, 2021, primarily attributable to the increase of interest rate associated with our money market fund.

 

Comparison of the nine months ended September 30, 2022 and 2021

 

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

General and administrative expenses

 

$

1,567

 

 

$

2,143

 

Gain on sale of assets

 

 

(445

)

 

 

(144

)

Total operating expenses

 

 

1,122

 

 

 

1,999

 

Loss from operations

 

 

(1,122

)

 

 

(1,999

)

Interest income

 

 

70

 

 

 

19

 

Net loss

 

$

(1,052

)

 

$

(1,980

)

 

General and administrative expenses

General and administrative expenses were $1.6 million for the nine months ended September 30, 2022 compared to $2.1 million for the nine months ended September 30, 2021, a decrease of $0.5 million, or 27%. This decrease was primarily attributable to the decrease in both stock-based compensation expense and consulting fees.

Gain on sale of assets

Gain on sale of assets was $0.5 million for the nine months ended September 30, 2022, primarily attributable to the Option fee to purchase one of our preclinical programs paid by the Purchaser. Gain on sale of assets was $0.1 million for the nine months ended September 30, 2021, attributable to the sale of certain of our preclinical programs to a third party.

Interest income

Interest income was $0.1 million for the nine months ended September 30, 2022 and less than $0.1 million for the nine months ended September 30, 2021, primarily attributable to the increase of interest rate associated with our money market fund.

12


 

Liquidity and Capital Resources

Sources of liquidity

We have financed our operations through September 30, 2022 primarily through private placements of convertible preferred stock, collaborations, public offerings of our securities, secured debt financings, sales of our common stock and sales of our commercial and in-process research and development assets. As of September 30, 2022, we had unrestricted cash and cash equivalents of $13.1 million.

 

Cash flows

The following table provides information regarding our cash flows for the nine months ended September 30, 2022 and 2021:

 

 

 

Nine Months Ended
September 30,

 

(in thousands)

 

2022

 

 

2021

 

Net cash (used in) provided by operating activities

 

$

(1,557

)

 

$

137

 

Net cash provided by investing activities

 

 

445

 

 

 

144

 

Net cash provided by financing activities

 

 

 

 

 

239