Ocera Therapeutics fka OCRX

[GrthzGd]

MKN still has a VP running IR. When I saw MKN's settlement with the opioid victims to be almost complete I sent him a query to which he responded, somewhat confusingly, that MKN had fully impaired its Ocera Hepatic Encephalopathy development program, but that the CVRs were not impaired. He provided clarification as follows:

The CVRs remain intact and are attached to any future development on the program - nothing has changed to the contractual terms of the CVR agreement.

The recorded intangible asset value within the financial statements has been impaired fully as a result of our discontinuation. From our perspective the probability of achievement of any future milestones is remote, but we’ll obviously explore possibilities to partner the asset to someone who might want to pick up the development.

Someone ought to buy the program and restart its development.

Such a move ought also to create a market for our CVRs.

[king oil]

I can’t believe how far MNK has fallen. In hindsight it’s really bad luck that ocera was acquired by them vs a more profitable company. I’ve given up any hope we’ll see any money for our cvr’s.

[king oil]

thank-you longx for the great info and for continuing to share it here.

These CVR's are really horrible. I'll never opt for them again if given the choice. There is just too much uncertainty and risk associated with them IMO.

[longx]

Hi All,
I found the following text in Mallinckrodt 2020 Q1 earning report transcript (a link to the full copy of the text can be found at the end of this post):

First, we focused on keeping our employee safe, while ensuring the patients we serve have continued access to medicines and therapies. I’m pleased to share that to date we’ve continued to manufacture, supply and deliver our products largely without interruption. Further, while we’re seeing some delays in our clinical studies (due to COVID-19), we continue to make progress on important programs like MNK-6105, as well as franchise modernization initiatives such as Acthar Gel self-injector and INOmax EVOLVE.

And the following:

Notably, we’ve continued to prepare for the initiation of our global Phase 3 trial of MNK-6105, L-ornithine phenylacetate, for the treatment of patients with advanced liver disease suffering from hepatic encephalopathy. You'll recall due to the complexity of this condition and the challenges of conducting a single large pivotal registration trial, we saw the alignment with the FDA through utilization of special protocol assessment procedure, and are working closely with them to finalize study requirements. We continue to anticipate the start of this important trial later this year.

Please note that MNK-6105 is the IV version while MNK-6106 is the Oral version of OCR-002. Mallinckrodt initially planned to start this phase-3 clinical trial by the end of 2019, but postponed to April/2020, then due to COVID-19, it's now moved to later this year.

The prospect of filing bankuptcy is now zero(0) % as the company is going to spin off into independent/publicly traded companies; one with focus on generic drugs with the name retained as "Mallinckrodt", while the other for brand products with the new name as "Sonorant" and trading symbol as SRTX. Hopefully we'll know in details on when the spin-off to start in the upcoming annual general shareholders meeting which is scheduled on 05/13/2020 (next Wednesday)

Link to Q1 2020 earning report transcript:
https://seekingalpha.com/article/4343174-mallinckrodt-plc-mnk-ceo-mark-trudeau-on-q1-2020-results-earnings-call-transcript?part=single

Link to MNK-6105 clinical trial page:
https://clinicaltrials.gov/ct2/show/NCT04128462

Links to the announcement for spinning off into 2 companies:
- Original announcement:
https://www.prnewswire.com/news-releases/mallinckrodt-plans-spin-off-of-specialty-generics-business-to-shareholders-300761097.html
- Updated announcement:
https://www.prnewswire.com/news-releases/mallinckrodt-updates-plans-for-company-separation-and-spin-off-of-specialty-generics-business-to-shareholders-300857099.html

[king oil]

Thanks. Those are very logical and valid points. My frustration is making me skeptical and suspicious. Hopefully we see some progress this year.

[shareholder_boar]

Considering the long life of the CVRs (end date 12/2029), the relatively low cost of the first milestone ($10 million), and that there was no reason to buy OCRX other than to try bring the compound to market, I don't see MNK dragging their heels. The sooner they can get into a definitive trial the sooner they can get a positive return on their investment.

Now for the sales milestone, sure, if sales get close to to required half billion then MNK would likely factor that milestone payment into their sales efforts.

I'm sure the OCRX board would have preferred more money up front also, but after the troubles of the Phase 2 trial and all the uncertainty whether this product will ever be approved, it seems perfectly reasonable to have a CVR. Fortunately it just requires trial enrollments and not approval so faster to payments

[king oil]

Thanks. I wonder if there is any chance they are purposely going slow to avoid making the milestone payments? Looks like shareholders are getting screwed by this arrangement. Ocera should have insisted on a better deal with more money upfront and less on these stupid CVR’s.

[shareholder_boar]

The phase 2 trial for the oral formulation is now up and running but the Phase 3 for the IV formulation that would trigger the milestone payment is still listed as "Not yet recruiting". Not a single change since it first appeared at clinicaltrials.gov in October.

Meanwhile, Mallinckrodt continues to drop their estimated value of the CVRs that is required for accounting:

"The Company determined the fair value of the contingent consideration based on an option pricing model to be $16.6 million and $21.5 million as of September 27, 2019 and December 28, 2018, respectively."

That's about $0.5 per unit. At least it is still higher than the $0.00 figure based on "If it is unpriced it must be zero" model used by the guy on here trying to evade income taxes.

[king oil]

Anyone know if there has been any update on milestone 1? Is was targeted for completion by year-end but at this point it’s not looking likely.

[king oil]

Payments depend on milestones so if MNK files for Bankruptcy it’s unlikely we would see any payments.

[xlofer]

Anyone know if MNK file bankruptcy we will still receive our money.

[king oil]

I looked back at previous posts to confirm the milestone payments. As you already stated milestone 1 is $0.34/share. The others are:

Milestone 1: $0.34 for the first patient enrolled in a Phase 3 IV trial

Milestone 2: $0.52 for the first patient enrolled in a Phase 3 oral trial

Milestone 3: $1.72 for cumulative sales exceeding $500M.

[king oil]

That’s great news. Thanks again for sharing it. Will be interesting to see how brokers treat the payments on tax statements. Income, dividend, capital gains?

[stet]

That's 10K going to my Roth account. Appreciate the news.

[longx]

According to today news release (see the link below)
The first milestone payment of $0.34/share will be by the end of this year: "...The company expects to begin recruiting by the end of 2019 for a Phase 3 clinical trial investigating MNK-6105 in patients being treated for acute HE in the hospital."

And once phase 2a of MNK-6106 to be completed by the end of Q1/2020, if the results is good, phase 3 should follow after that and we will receive the 2nd milestone payment in Q2/2020.

https://finance.yahoo.com/news/first-patient-enrolled-mallinckrodts-phase-104500633.html

[longx]

As described in the clinical website: https://clinicaltrials.gov/ct2/show/NCT03712280
They're still in phase 2a for studying pharmacodynamics/safety/pharmacokinetics of oral administration MNK6106. If the clinical data comming out in the upcoming October is good, they're definitely going to start Phase 3 trial for oral MNK6106, and for this we'll receive $0.52/share as soon as the very first patient enrolled for the trial.

Below is the 3 milestone payments:
1). $0.52/share if the first patient is enrolled in a Phase 3 for oral trial MNK6106
2). $0.34/share if the first patient is enrolled in a Phase 3 for IV trial MNK6105.
3) $1.72/share if the combined sales of MNK6105 & MNK6106 worldwide exceed $500 million before 2029

BTW, below is the link to the previous Phase 2b clinical trial for Oral OCR-002 conducted by Ocera:
https://clinicaltrials.gov/ct2/show/NCT01966419

[king oil]

Thanks longx. Would this be the first milestone payment? I think it was around 90 cents per share?

[xlofer]

Thanks for update

[longx]

Hi All,
Just to let you know that Mallinckrodt had updated MNK-6106 study record by delaying the clinical results by 3 months; the clinical trial completion date was originally scheduled on 7/30/2019 is now moved to 10/30/2019.

Detailed info can be found via the following link:
https://clinicaltrials.gov/ct2/history/NCT03712280?A=3&B=4&C=Side-by-Side#StudyPageTop

[king oil]

Just noticed there's a class action lawsuit claiming that the sale wasn't fair to OCRX shareholders, filed in April 2018.

http://securities.stanford.edu/filings-documents/1064/OTI00_06/2018426_r01c_17CV06687.pdf

The case was dismissed but I believe it is pending an appeal by plantiff

http://securities.stanford.edu/filings-documents/1064/OTI00_06/20181210_r01x_17CV06687.pdf

Meanwhile, we hear nothing about the milestone payments and the CVR's just sit there.

[king oil]

thanks stet. I will give that a try. This was my first experience with CVRs and thus far I am not a fan of them at all. They sit in the account with no status updates or info available. The acquiring company has no obligation to notify the holders of any progress towards achieving the milestones. We're all basically in the dark and I can't help but wonder if the acquiring company would let certain dates slip to avoid making some of the milestone payments.

Next time I will sell all shares and let someone else hold the CVRs.

[stet]

King Oil, I did the conversion from my traditional IRA that I had set up for a previous conversion that was taxable and reported on a 1099 from Merrill Edge. When I did the subject transaction it was not reported on a 1099, and yes I did it because the rts. have no cash value and can not be traded.

[king oil]

Hi stet. If you don’t mind sharing the details did an accountant confirm that the conversion isn’t taxable? Do you know if the reason is because the cvr can’t be traded and has 0 value in a brokerage account? Thanks

[king oil]

thanks. In hindsight I'm not a fan of the CVR model. It seems strange for a company to have an incentive to delay achieving milestones. It may be that the reward of achieving a milestone far outweighs the cost of paying the CVR, but if the time difference comes down to a few days or weeks perhaps they're willing to wait and avoid the payment.

[stet]

Thanks longx.I moved my 30k rts from traditional IRA to Roth IRA, so at least any payment will be tax free.

[longx]

According to SEC filing, the new name for IV OCR-002 is "MNK-6105" and Oral OCR-002 is "MNK-6106"

As part of the acquisition of Ocera in December 2017, the Company provided contingent consideration to the prior shareholders of Ocera in the form of both patient enrollment clinical study milestones for MNK-6105 and MNK-6106 (previously referred to collectively as OCR-002), which represent the IV and Oral formulations, respectively, and sales-based milestones associated with MNK-6105 and MNK-6106. The Company determined the fair value of the contingent consideration based on an option pricing model to be $21.4 million and $22.0 million as of March 30, 2018 and December 29, 2017, respectively.
(Note: a copy of the filing can be found on SA).
https://seekingalpha.com/filing/4012613

They're going to start Phase 2a for MNK-6106 this November and estimated to be completed by 08/30/2019.
https://clinicaltrials.gov/ct2/show/NCT03712280?term=hepatic+encephalopathy+Mallinckrodt&recrs=abf&rank=1
And Phase 3 will be started after that, so I guess we won't receive any payment until late 2019.

[king oil]

I think milestone 1 should have been completed by now. I hope it's not a bad sign.

[stet]

I kinda lost track. Thanks for the info.

[king oil]

For anyone still following the progress of ocr-002 it's been renamed to MNK-6105 and as far as I can tell still hasn't started phase 3 trials yet.

http://vtessepharma.com/research/technology/pipeline

[king oil]

Anybody have any new guesses on timing of the milestones?

[king oil]

There is nothing left to do with OCRX except wait to see if the milestones are hit. All OCRX shareholders have already received cash and CVRs for their shares. The rest is up to MNK to make progress. If the milestones are hit, cash payments will be made to holders of the CVRs. There's a good opinion on the probability of hitting the milestones here: https://alphavulture.com/tag/ocrx/

[EAMellon]

I’m in the same boat! I would love to know too!

[Purehoney]

What do I do with this??

I am new to investing and had 300 shares of this company. I couldn't quite follow along with everything that was going on with it so I am really lost. Could some kind person explain to me what has happened and if there is way to get my money back out of this? Thank you much!

[stet]

I moved all my ocrx rts. from my traditioal IRA into a Roth IRA without triggering a taxable event. Could work out well if we receive a milestone payment.

[king oil]

anybody still following the progress? I guess we'll have to follow Mallinckrodt to figure out if any milestones have been reached.

[king oil]

Haha yes I hadn’t thought of that. I wonder if they’ll keep cvr holders updated on status of the milestones or if we’ll just see payments show up in our accounts.

[shareholder_boar]

Messy yes, but the confusion might work to one's advantage in that you definitely have an out should the IRS investigate and disagree with your interpretation of the code.

In any event, the sales proceeds from the OCRX merger (or tender) will reflect $1.52/share on your 2017 1099.

[king oil]

CVR tax treatment

Been reading up on how to treat payments tied to a CVR for tax purposes. It looks relatively messy vs. simple capital gains from selling the stock. Hopefully the payments are worth the extra paperwork.

[king oil]

that is great news then. Hopefully we get the first couple milestones in 2018 if Phase 3 can start.

[king oil]

thanks, received mine earlier today also. It will sure be nice if they hit one or more milestones.

[shareholder_boar]

"..there's no sign of the CVR's yet"

Mine arrived today.

[king oil]

The shares have been swapped out with cash at $1.52 per share in my brokerage account, however there's no sign of the CVR's yet.

[longx]

According to 8-K form wiki page, the following should be described in the form:
- Results of operations and financial condition
- Creating certain financial obligations, such as incurrence of material debt
- Triggering events that accelerate material obligations (such as defaults on a loan)
- Costs associated with exit or disposal plans

https://en.wikipedia.org/wiki/Form_8-K

[king oil]

I guess it depends on whether no mention means there isn’t any shortfall vs they haven’t yet calculated and confirmed it.

[longx]

According to the latest 8-K filing (dated 12/11/2017) on Edgar:
- The whole Ocera's management has been replaced with Mallinckrodt people.
- There wasn't any mention of the amount of cash shortfall (Ocera's existing cash minus all debts & transaction expenses) described in the 8-K filing. So I guess the deduction of 4cents for every $1M cash-shortfall won't occur and shareholders will receive the full amount $.34/share in the first milestone payment (?)

[king oil]

The tender offer by a subsidiary of Mallinckrodt plc for all of the outstanding shares of Ocera common stock expired as scheduled at 12:00 midnight (Eastern) on December 8, 2017. Excluding Ocera shares tendered by notice of guaranteed delivery, more than 50% of Ocera shares were validly tendered into and not validly withdrawn from the tender offer pursuant to Section 251(h) of the Delaware General Corporation law, according to the depositary for the tender offer. As a result, Mallinckrodt and its subsidiary have accepted for payment and will promptly pay for all shares that were validly tendered and not validly withdrawn.

Following its acceptance of the shares tendered in the tender offer, pursuant to Section 251(h) of the Delaware General Corporation Law, Mallinckrodt merged its subsidiary with and into Ocera without a vote of Ocera's other stockholders. As a result of the completed merger, Ocera became an indirect, wholly owned subsidiary of Mallinckrodt. In connection with the merger, all Ocera shares not validly tendered into the tender offer have been cancelled and converted into the right to receive $1.52 per share, plus one Contingent Value Right to receive one or more payments in cash of up to $2.58 per share, which is the same price per share offered in the tender offer. As a result of the acquisition, Ocera shares will cease to be traded on NASDAQ.

[king oil]

Thanks for sharing, those estimates look reasonable. It's too bad the CVRs can't be traded. Now we just wait and see.

[DewDiligence]

Handicapping OCRX’s CVR milestones: #msg-136845360.

[TRACING]

halted
Trading in Ocera Therapeutics,Inc. (OCRX) was halted today at 08:28:46 a.m. ET due to additional information requested from the company related to the completion of its acquisition by Mallinckrodt plc. It is anticipated (OCRX) will be suspended on NASDAQ effective 12/12/17. Please call 800-537-3929 or 301-978-8500 if you have any questions.

[shareholder_boar]

Does indeed look like somebody wanted in and didn't want to space out the buying over the last few hours to try get a better average price. Must be a strong believer that both the IV and oral milestones will be hit.