수요일, 4월 24, 2024
HomeValue InvestingClark Road Worth: Merrimack Prescription drugs: Ipsen Milestone Achieved, Liquidation

Clark Road Worth: Merrimack Prescription drugs: Ipsen Milestone Achieved, Liquidation

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Merrimack Prescription drugs (MACK) ($220MM market cap) is basically a publicly traded CVR in a c-corp kind, I owned the inventory briefly in 2017 after the corporate offered Onivyde to Ipsen and dedicated to passing via any future milestone funds associated to Onivyde to shareholders.  Sadly, it did not have the identical protections of a CVR and administration ended up diluting shareholders of these future milestone funds by elevating fairness to pursue their remaining improvement stage pipeline.  In 2019, the corporate formally gave up improvement of recent medicine, administration was eliminated and it has been little greater than a shell since as the corporate awaited any milestone funds from Ipsen.

Seven quick years later, Ipsen introduced that Onivyde was accredited by the FDA for metastatic pancreatic ductal adenocarcinoma (“mPDAC”), a very terrible type of pancreatic most cancers.  This approval triggers a $225MM milestone cost to Merrimack, the remaining milestones for Onivyde and one other asset sale (to Elevation) aren’t anticipated to be reached.  Merrimack waited little time to announce they have been formally liquidating pending a shareholder vote in Could, with the liquidation distribution vary of $14.65 to $15.35/share.

We’ll have to attend for the proxy to see how conservative this estimated vary is, however to my eye, it appears to be like fairly conservative, with the precise distribution more likely to be on the prime quality and even simply above.  Under is my math, as typical, it is likely to be wildly off (and any variance to those numbers can swing the anticipated IRR fairly violently), I am significantly cautious of my tax estimate, any tax wizards on the market please be at liberty to chime in beneath within the remark part.

The corporate has $215MM in NOLs which nearly matches the Ipsen windfall, however taxes are nonetheless due beneath part 453A of the IRS code, which in my novice learn imposes an curiosity penalty on deferred gross sales like a milestone cost.  The rate of interest relevant has diversified throughout the final 7 years, since I am only a retail man, I did not construct out a full mannequin, however I believe my quantity is roughly proper, perhaps a contact low.  The $0.03 distribution is solely a 50% haircut of my estimated escrow quantity to account for any bills through the liquidating belief lifecycle.

The board at MACK has been managed by traders/house owners since 2019, they have been prepping and making ready for this present day since, I do not anticipate any massive stunning bills or a lot of an escrow.  Congratulations to that crew, I’ve adopted at a brief distance however by no means felt absolutely snug betting on an FDA approval.

Disclosure: I personal shares of MACK

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