Replies to post #10905 on GTC Biotherapeutics (fka GTCB)

[DewDiligence]

Merrimack Pharmaceuticals Raises $60 Million in Private Financing

[This is the sixth round of funding since Merrimack’s inception, and the money came from the same cadre of VC heavyweights who have supported Merrimack to date. Regarding MM-093 (the drug supplied by GTC), this PR is to my knowledge the first time Merrimack has publicly disclosed a timetable for the uveitis trial: results are expected in 2008. Merrimack previously disclosed that results from the MM-093 trial in RA are due this summer.]

http://biz.yahoo.com/prnews/080610/netu106.html

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Funds provide resources to advance Merrimack's robust pipeline of biologics targeting autoimmune disease and cancer

Tuesday June 10, 3:00 pm ET

CAMBRIDGE, Mass., June 10 /PRNewswire/ -- Merrimack Pharmaceuticals, Inc., a biotechnology company focused on the discovery and development of novel treatments for autoimmune disease and cancer, today announced that it has raised $60 million in a Series F private equity financing.

Existing and new investors participated in the financing including Credit Suisse First Boston Next Fund, Inc., Crocker Ventures, HNI Holdings, Limited, funds advised by Noonday Asset Management, L.P., TPG-Axon Capital, and WT Investment Advisors Fund LP.

Proceeds from the financing will be used to advance Merrimack's proprietary pipeline of biologic therapies targeting autoimmune disease and cancer. The Company's lead product, MM-093, is currently in a Phase 2 study in rheumatoid arthritis and a pilot study in patients with autoimmune uveitis. Results from the two studies are expected later this year.

MM-121, the Company's second product and the industry's first Network Biology derived therapeutic, is expected to enter Phase 1 trials later this year. The Company is also advancing a set of innovative, antibody therapies targeting solid tumors through pre-clinical studies and plans to file an IND on its third product in early 2009.

"Our goal is to continue building shareholder value by advancing a robust pipeline and by investing in our early stage programs," said Mr. Robert Mulroy, President & CEO. "This financing provides us with the strategic resources to advance our lead programs while further validating the discovery and development efforts generated out of our Network Biology platform."

Merrimack Pharmaceuticals, Inc., is a biotechnology company focused on the discovery, design and development of novel treatments for diseases in the areas of autoimmunity and cancer. Its lead compound, MM-093, is currently in clinical development to treat patients with rheumatoid arthritis or with autoimmune uveitis. MM-093 is an investigational drug and has not been approved by the U.S. Food and Drug Administration or any international regulatory agency. The company's proprietary Network Biology discovery platform, developed with the help of leading scientists from MIT and Harvard, enables the high throughput profiling of protein networks as a basis for improved validation, lead identification and speed in the development of innovative and effective therapeutics. Merrimack is a privately-held company based in Cambridge, Massachusetts. For additional information, please visit http://www.merrimackpharma.com.
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[DewDiligence]

GTC’s Supply Relationship with Merrimack Pharma

[Added paragraph on Merrimack’s funding.]


Merrimack is a private company based in Cambridge, Massachusetts whose lead drug, MM-0903, is human alpha-fetoprotein produced by GTC using transgenic goats. Merrimack and GTC have been working together since 1999 (when Merrimack was doing business as Atlantic BioPharmaceuticals); the most recent update to the relationship came in September 2005 (#msg-7807962).

Merrimack is well-funded: it raised $60M of new capital on 6/10/08 from the same cadre of VC heavyweights who supported Merrimack since its inception (#msg-29921273).

MM-093 is currently being tested in rheumatoid arthritis (RA) and uveitis, an ophthalmic “orphan” indication. (A program in psoriasis has been discontinued.) In both indications, Merrimack began a phase-2 trial in April 2007:

#msg-27652344 RA
#msg-18468726 Uveitis

Interim data from the RA program was reported at the EULAR conference in June 2007 (#msg-20817412). Patient enrollment was completed on 3/14/08 and reporting of the data is expected this year at an unspecified venue.

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Merrimack is a private company and does not reveal many details of its clinical programs; however, GTC generally discloses when it receives payments from Merrimack, which allows investors to track the collaboration to a limited degree.

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What are the economics of the Merrimack relationship with GTC?

The main economic upside for MM-093 is in RA, a very large indication (#msg-27669769). If MM-093 works in RA, its non-TNF-a mechanism of action and presumably low incidence of side effects ought to put it in a strong position to serve the roughly 50% of RA patients for whom one of the TNF-a drugs (Remicade, Humira, Enbrel) does not do the trick. Moreover, MM-093 should be safer than Rituxan, which is emerging as a popular choice in second-line RA following failure on a TNF-a drug.

Although it’s still early in the development program, it’s not unreasonable to think that MM-093 has bona fide blockbuster potential in RA. If this turns out to be true, even relatively thin supplier margins could eventually mean big money for GTC.

My guess is that GTC will get a mid-single-digit IP royalty on MM-093 sales and a markup on GTC’s fully-allocated production cost for bulk product that GTC sells to Merrimack. For the production cost mark-up, the industry standard is about 10%. If, for the sake of discussion, we say that GTC’s fully-allocated production cost will be 15% of the end-user selling price of MM-093, then the 10% mark-up is equivalent to a 1.5% royalty on sales over and above the royalty that will be earned for Merrimack’s use of GTC’s IP. Hence, the overall economic value of the deal for GTC could be a high-single-digit royalty on sales. This could amount to a highly consequential income stream if MM-093 achieves blockbuster status.

GTC also holds a small equity stake in Merrimack, which was established in 2003 (#msg-29295823).

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What is the IP for MM-093?

#msg-20505008
http://www.merrimackpharma.com/newsEvents/2002/26Feb02CompMatterPatent.pdf



Let’s talk biotech!
“The efficient-market hypothesis may be
the foremost piece of B.S. ever promulgated
in any area of human knowledge!”