Item 1.01: Entry into a Material Definitive Agreement
On January 7, 2017, Merrimack Pharmaceuticals, Inc. (the
Company
or
Merrimack
) entered into an Asset Purchase and
Sale Agreement (the
Asset Sale Agreement
) with Ipsen S.A. (
Ipsen
).
Pursuant to the Asset Sale Agreement, upon the
terms and subject to the conditions thereof, Ipsen will acquire Merrimacks right, title and interest in the non-cash assets, equipment, inventory, contracts and intellectual property primarily related to or used in Merrimacks business
operations and activities involving or relating to developing, manufacturing and commercializing ONIVYDE and MM-436 (the
Commercial Business
). Ipsen will not acquire Merrimacks rights to $33,000,000 in net milestone payments
that may become payable pursuant to Merrimacks License and Collaboration Agreement with Shire, among other excluded assets. Pursuant to the Asset Sale Agreement, Ipsen will pay Merrimack $575,000,000 in cash (subject to a working capital
adjustment as provided in the Asset Sale Agreement) and will assume certain related liabilities. Following the closing of the asset sale, Merrimack may be entitled to additional payments based on achievement by or on behalf of Ipsen of certain
milestone events if the FDA approves ONIVYDE for certain indications as follows:
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$225,000,000 upon the regulatory approval by the FDA of ONIVYDE for the treatment of metastatic adenocarcinoma of the pancreas as first-line treatment (i) in combination with fluorouracil and leucovorin (with or
without oxaliplatin), (ii) in combination with gemcitabine and abraxane, or (iii) following submission and filing of regulatory approval by Ipsen for purposes of commercialization by Ipsen;
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$150,000,000 upon the regulatory approval by the FDA of ONIVYDE for the treatment of small cell lung cancer after failure of first-line chemotherapy; and
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$75,000,000 upon the regulatory approval by the FDA of ONIVYDE for an additional indication unrelated to those described above.
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The Asset Sale Agreement has been approved by the Boards of Directors of each of Merrimack and Ipsen. A copy of the Asset Sale Agreement is filed herewith as
Exhibit 2.1 and is incorporated herein by reference.
Merrimack has made customary representations and warranties and has agreed to customary covenants
regarding the operation of the Commercial Business between the execution of the Asset Sale Agreement and the closing of transaction, including: (i) subject to certain exceptions, to conduct the Commercial Business in the ordinary course during
the interim period; (ii) to cause a stockholder meeting to be held to consider approval of the sale of the assets of the Commercial Business pursuant to the Asset Sale Agreement; (iii) subject to certain exceptions to permit
Merrimacks Board of Directors (the
Board
) to act in accordance with its fiduciary duties, that the Board will recommend that its stockholders approve the sale of the assets of the Commercial Business pursuant to the Asset
Sale Agreement; and (iv) not to solicit proposals relating to alternative proposals and, subject to certain limited exceptions to permit the Board to act in accordance with its fiduciary duties, not to enter into discussions or negotiations
concerning, or to provide information in connection with, alternative proposals.
In addition, the Asset Sale Agreement requires Merrimack to indemnify
Ipsen for damages arising out of (i) any breach of a representation or warranty of Merrimack in the Asset Sale Agreement or the failure to perform any covenant, agreement or certain related agreements required by the Asset Sale Agreement;
(ii) any liabilities of Merrimack not assumed by Ipsen in the transaction; and (iii) for certain other matters related to taxes and outstanding claims. Merrimacks indemnification obligations for its representations and warranties
generally survive for 16 months following the closing and the obligations for the fundamental representations survive for 40 months following the closing. Merrimacks maximum aggregate liability for indemnification will not exceed $95,000,000,
subject to certain limited exceptions.
Merrimack has agreed to abstain from the following actions subsequent to the closing of the asset sale including:
(i) from the period beginning on the closing date and ending on the fifth anniversary of the closing date, to abstain from acquiring rights to any approved or marketed product that has as an indication the treatment of metastatic adenocarcinoma
of the pancreas or treatment of small cell lung cancer (provided this will not restrict Merrimack in any way with respect to the pipeline of drugs it already is developing); (ii) during the three-year period after closing, to abstain from
soliciting for employment any Merrimack employee who accepts employment with Ipsen, subject to the conditions provided in the Asset Sale Agreement; (iii) to instruct its directors and officers to cause its employees and other representatives to
abstain from engaging in behavior that would disparage or otherwise damage Ipsen or any of its affiliates; and (iv) to have available, for the 18 months after the closing, cash resources sufficient to fund payment obligations to Ipsen that
Merrimack reasonably determines would be required.
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The consummation of the transaction is subject to customary closing conditions, including, among others:
(i) the receipt of the approval of Merrimacks stockholders; (ii) the expiration or termination of the required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; (iii) the absence of a breach of
Merrimacks representations and warranties that would cause a material adverse effect on the Commercial Business; (iv) the absence of a business material adverse effect; and (v) the performance of certain covenants in all material
respects.
The Asset Sale Agreement contains certain termination rights for Merrimack and Ipsen. Upon termination of the Asset Sale Agreement under
specified circumstances, Merrimack will be required to pay Ipsen a termination fee of $25,000,000. This includes where the Asset Sale Agreement is terminated in connection with Merrimack accepting a superior proposal or because Merrimacks
Board has changed its recommendation of the sale to its stockholders. The termination fee will also be payable if the Asset Sale Agreement is terminated because Merrimacks stockholders did not vote to adopt the Asset Sale Agreement and, prior
to such termination, a proposal to acquire at least 50% of the consolidated assets of Merrimack with respect to the Commercial Business or at least 50% of Merrimacks voting securities has been publicly disclosed and Merrimack enters into a
definitive agreement with respect to such proposal within 12 months after such termination, which is subsequently consummated. In addition, Merrimack will be required to reimburse Ipsen for up to $3,000,000 of its out-of-pocket expenses incurred in
connection with the transaction and the Asset Sale Agreement if the Asset Sale Agreement is terminated because Merrimacks stockholders do not vote to approve it. The Asset Sale Agreement also provides that either party may specifically enforce
the other partys obligations under the Asset Sale Agreement.
In addition to the foregoing termination rights, and subject to certain limitations,
Merrimack or Ipsen may terminate the Asset Sale Agreement if the asset sale is not consummated by June 30, 2017.
The representations and warranties
of each of the parties contained in the Asset Sale Agreement and the assertions embodied in those representations and warranties are qualified by information in a confidential disclosure schedule that Merrimack delivered to Ipsen in connection with
the execution of the Asset Sale Agreement. In addition, certain representations and warranties may not be accurate or complete because they are subject to a contractual standard of materiality different from those generally applicable to
stockholders or were used for the purpose of allocating risk between the parties rather than establishing matters as facts. Accordingly, investors should not rely on the representations and warranties as characterizations of the actual state of
facts, or for any other purpose, at the time they were made or otherwise.
The foregoing description of the Asset Sale Agreement does not purport to be
complete and is qualified in its entirety by reference to the full text of such agreements filed herewith as Exhibit 2.1 and incorporated herein by reference.
In addition, Ipsen has agreed to make offers of employment to certain identified employees of Merrimack as of the closing of the asset sale and to sublease
68,409 square feet of Merrimacks manufacturing facility. At the closing, Merrimack and Ipsen will enter into an intellectual property license agreement pursuant to which Ipsen will grant Merrimack an exclusive license with respect to the
portion of the transferred patents relating to certain liposomal technology and a non-exclusive license to the remainder of the transferred patents, in both cases for use outside of the field in which the Commercial Business will operate. In
turn, Merrimack will grant Ipsen a non-exclusive license with respect to the remaining patents owned by Merrimack at the closing for use in the field in which the Commercial Business will operate.
Merrimack has agreed to condition the sale of the Commercial Business on stockholder approval. Merrimack intends to file a proxy statement with respect to a
special meeting of Merrimacks stockholders to seek stockholder approval for the sale of the Commercial Business.