Merrimack Pharmaceuticals Announces Changes to Board of Directors
Company Enters into Cooperation Agreement with Newtyn Management and Western Standard. Independent Directors Noah Levy of Newtyn and Eric Andersen of Western Standard to Be Added to Merrimack Board, Effective Immediately. Newtyn and Western Have Agreed to Vote for Merrimack Slate of Nominees for 2019 Annual Meeting. Merrimack Believes that JFL Capital’s Plans for the Company Do Not Align with Views of Other Shareholders and Could Imperil Ability to Protect Potential Milestone Payments and NOLs
Merrimack Pharmaceuticals announced today that, effective immediately, its Board of Directors has appointed Noah G. Levy, of Newtyn Management, LLC (“Newtyn”) and Eric D. Andersen, of Western Standard, LLC (“Western”) to the Board, pursuant to a cooperation agreement.
Including Messrs. Levy and Andersen, the Board will nominate five directors for election at the 2019 Annual Meeting of Shareholders (the “2019 Annual Meeting”), which is scheduled for October 17, 2019. Mr. Levy’s and Mr. Andersen’s funds, Newtyn and Western, collectively represent approximately 15% of Merrimack shares outstanding, and Merrimack shares represented by all five Merrimack nominees now total approximately 23% of shares outstanding.
Under the agreement Messrs. Levy and Andersen have agreed to waive compensation for their Board service. It also provides that the Board will form a Committee on Strategy and Expenses, chaired by Mr. Levy, that will focus on cost containment, continued NOL safeguarding and milestone payment and shareholder distribution maximization. As part of the cooperation agreement, both Newtyn and Western have agreed to vote for all five of Merrimack’s nominees for election at the 2019 Annual Meeting. Newtyn’s and Western’s voting and other commitments under the cooperation agreement generally are evergreen with certain limited exceptions.
These changes were reached following engagement with a significant portion of Merrimack’s institutional and retail shareholders. During this process, it became clear to Merrimack that the key priorities for its shareholders – including Newtyn and Western – generally are to:
- Do everything possible to protect the more than $500 million in potential milestone payments the Company could receive from Ipsen S.A. and 14ner Oncology;
- Protect the approximately $200 million in NOLs to shield potential tax payments related to the potential milestones;
- Monetize the Company’s TNFR2 program, if possible, and other preclinical assets, in a cost-effective manner; and
- Maximize asset value per share by conserving the Company’s cash reserves while maintaining minimal operations and periodically examining ways to return additional capital to shareholders whenever possible.
“We are pleased to welcome Noah and Eric to our Board and appreciate the support of two of our significant investors throughout this process,” said Gary Crocker, Chairman of Merrimack's Board of Directors. “Merrimack has a carefully considered plan in place to continue our intense focus on cash management and to maximize the distribution of cash and potential milestone payments to our shareholders. Following numerous discussions with investors we feel confident that our strategy is aligned with their views.”
“As one of the Company’s largest shareholders, I look forward to serving on the Board. I also look forward to serving as Chair of the planned Committee on Strategy and Expenses, a position in which I intend to work to reduce costs, minimize risk and protect all fellow shareholders,” said Noah G. Levy of Newtyn.
Added Eric D. Andersen of Western, “I appreciate the constructive engagement and open dialogue with Merrimack's Board, and with this cooperation agreement, I look forward to collaborating with other Board members to maximize value for all shareholders.”
Prior to reaching an agreement with Newtyn and Western, Merrimack also engaged extensively with JFL and its advisors in an effort to reach a constructive solution that would prevent a contested election. During these discussions, JFL communicated to the Board that its intended strategy was to use approximately $10-15 million of the Company’s current cash reserves to purchase and develop a new small molecule in early stages of therapeutic development – a strategy JFL admitted could also require the Company to raise additional funds, which would dilute existing shareholders and could impair the Company’s NOLs. Under JFL’s plan the Company would also explore the potential issuance of a preferred security entitling holders to the potential milestone payment, assuming this was possible from a tax perspective.
These discussions with JFL were constructive and resulted in the Company offering the fund two seats on the Board and proposing the formation of a strategic committee that would be chaired by one of the JFL nominees. Unfortunately, these discussions broke down over a few key issues, including the requirement by JFL that the strategic committee would have binding conditions placed on it preventing the committee from voting against an asset acquisition if they did not think it was in the best interest of the Company and all shareholders. Without this requirement in place, JFL would not agree to refrain from proxy fights against the Company following the 2019 Annual Meeting. Merrimack ultimately concluded this was not something that could be agreed to while preserving the Board’s ability to fulfill its fiduciary duties. Further, after receiving substantial shareholder feedback, the Board concluded that a one proxy season standstill did not provide a long-term solution to the cost and distraction associated with the constant threat of a proxy fight by JFL looming over the Company and the investment of our shareholders. In order to convince JFL to accept a standstill that lasted more than just through the 2019 Annual Meeting, the Board made a reasonable and shareholder-centric proposal that any strategy proposed by the strategic committee that the Board could not accept after taking into account its fiduciary duties would be put to a vote by all shareholders. JFL was unwilling to accept this proposal.
