UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2019
OR
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☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-35409
Merrimack Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
|
Delaware |
04-3210530 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
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One Kendall Square, Suite B7201 Cambridge, MA |
02139 |
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(Address of principal executive offices) |
(Zip Code) |
(617) 441-1000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
☐ |
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Accelerated filer |
☒ |
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Non-accelerated filer |
☐ |
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Smaller reporting company |
☒ |
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Emerging growth company |
☐ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common stock, $0.01 par value |
MACK |
Nasdaq Global Market |
As of May 3, 2019, there were 13,342,909 shares of Common Stock, $0.01 par value per share, outstanding.
PART I
FINANCIAL INFORMATION
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Item 1. |
2 |
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Condensed Consolidated Balance Sheets – March 31, 2019 and December 31, 2018 (unaudited) |
2 |
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3 |
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4 |
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5 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
15 |
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Item 3. |
22 |
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Item 4. |
22 |
PART II
OTHER INFORMATION
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Item 1A. |
23 |
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Item 5. |
48 |
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Item 6. |
49 |
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50 |
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i
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:
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our plans to develop and commercialize our product candidates and diagnostics; |
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• |
our ongoing and planned discovery programs, preclinical studies and clinical trials; |
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the anticipated cost savings in connection with our restructuring efforts; |
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our plans to explore strategic alternatives; |
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our ability to establish and maintain collaborations for our product candidates; |
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our receipt of payments related to the milestone events under the asset purchase and sale agreement with Ipsen S.A. or under the license and collaboration agreement between Ipsen S.A. and Les Laboratoires Servier SAS (as assignee from Shire plc), when expected or at all; |
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the timing of and our ability to obtain and maintain regulatory approvals for our product candidates; |
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the rate and degree of market acceptance and clinical utility of our product candidates; |
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our intellectual property position; |
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our commercialization, marketing and manufacturing capabilities and strategy; |
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the potential advantages of our approach to drug research and development; and |
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our estimates regarding expenses, future revenues, capital requirements and needs for additional financing. |
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in Part II, Item 1A. Risk Factors, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments that we may make.
You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
NOTE REGARDING TRADEMARKS
ONIVYDE® is a trademark of Ipsen S.A. Any other trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q are the property of their respective owners.
1
FINANCIAL INFORMATION
Merrimack Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
|
(in thousands, except per share amounts) |
|
March 31, 2019 |
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December 31, 2018 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
36,542 |
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$ |
20,079 |
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Marketable securities |
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21,924 |
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51,199 |
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Restricted cash |
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|
584 |
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|
584 |
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Prepaid expenses and other current assets |
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4,644 |
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|
4,240 |
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Total current assets |
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63,694 |
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76,102 |
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Property and equipment, net |
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1,009 |
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|
2,269 |
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Equity method investment |
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7,127 |
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|
7,428 |
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Other assets |
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2,523 |
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|
2,744 |
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Total assets |
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$ |
74,353 |
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$ |
88,543 |
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Liabilities and stockholders’ equity |
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|
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Current liabilities: |
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Accounts payable, accrued expenses and other |
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$ |
10,339 |
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$ |
13,677 |
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Note payable |
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1,475 |
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— |
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Deferred rent |
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— |
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1,118 |
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Total current liabilities |
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11,814 |
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14,795 |
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Note payable, net of discount and current portion |
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13,519 |
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14,873 |
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Other long-term liabilities |
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56 |
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56 |
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Total liabilities |
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25,389 |
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29,724 |
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Commitments and contingencies |
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Stockholders’ equity: |
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Preferred stock, $0.01 par value: 10,000 shares authorized at March 31, 2019 and December 31, 2018; no shares issued or outstanding at March 31, 2019 or December 31, 2018 |
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— |
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— |
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Common stock, $0.01 par value: 30,000 shares authorized at March 31, 2019 and December 31, 2018; 13,343 shares issued and outstanding at March 31, 2019 and December 31, 2018 |
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1,334 |
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1,334 |
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Additional paid-in capital |
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581,365 |
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580,771 |
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Accumulated other comprehensive loss |
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— |
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(9 |
) |
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Accumulated deficit |
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(533,735 |
) |
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(523,277 |
) |
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Total stockholders’ equity |
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48,964 |
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58,819 |
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Total liabilities and stockholders’ equity |
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$ |
74,353 |
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$ |
88,543 |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Merrimack Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
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Three Months Ended March 31, |
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(in thousands, except per share amounts) |
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2019 |
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2018 |
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Operating expenses: |
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Research and development expenses |
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$ |
6,361 |
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$ |
13,106 |
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General and administrative expenses |
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3,683 |
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4,270 |
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Total operating expenses |
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10,044 |
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17,376 |
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Loss from operations |
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(10,044 |
) |
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(17,376 |
) |
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Other income and expenses: |
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Interest income |
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365 |
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275 |
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Interest expense |
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(478 |
) |
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— |
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Other (expense) income, net |
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(301 |
) |
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(681 |
) |
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Total other income and expenses |
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(414 |
) |
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(406 |
) |
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Net loss |
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$ |
(10,458 |
) |
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$ |
(17,782 |
) |
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Net loss per common share - basic and diluted |
|
$ |
(0.78 |
) |
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$ |
(1.33 |
) |
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Weighted-average common shares used to compute basic and diluted net loss per common share |
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13,343 |
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13,343 |
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Comprehensive loss: |
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|
|
|
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Net loss |
|
$ |
(10,458 |
) |
|
$ |
(17,782 |
) |
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Unrealized gain (loss) on marketable securities |
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9 |
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(12 |
) |
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Comprehensive loss |
|
$ |
(10,449 |
) |
|
$ |
(17,794 |
) |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Merrimack Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
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Common Stock |
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(in thousands) |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Loss |
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Accumulated Deficit |
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Total Stockholders’ Equity |
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Balance at December 31, 2018 |
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13,343 |
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$ |
1,334 |
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$ |
580,771 |
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$ |
(9 |
) |
|
$ |
(523,277 |
) |
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$ |
58,819 |
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Stock-based compensation |
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— |
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— |
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|
594 |
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— |
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— |
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|
594 |
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Unrealized loss on marketable securities |
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— |
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— |
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— |
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9 |
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— |
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9 |
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Net loss |
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— |
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— |
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— |
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|
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— |
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(10,458 |
) |
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(10,458 |
) |
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Balance at March 31, 2019 |
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|
13,343 |
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$ |
1,334 |
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$ |
581,365 |
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|
$ |
— |
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|
$ |
(533,735 |
) |
|
$ |
48,964 |
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|
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Common Stock |
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|
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|
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|
|
|
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(in thousands) |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Loss |
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Accumulated Deficit |
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|
Total Stockholders’ Equity |
|
||||||
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Balance at December 31, 2017 |
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13,343 |
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$ |
1,334 |
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$ |
577,721 |
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|
$ |
— |
|
|
$ |
(482,771 |
) |
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$ |
96,284 |
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Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
764 |
|
|
|
— |
|
|
|
— |
|
|
|
764 |
|
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Unrealized loss on marketable securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12 |
) |
|
|
— |
|
|
|
(12 |
) |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,782 |
) |
|
|
(17,782 |
) |
|
Balance at March 31, 2018 |
|
|
13,343 |
|
|
$ |
1,334 |
|
|
$ |
578,485 |
|
|
$ |
(12 |
) |
|
$ |
(500,553 |
) |
|
$ |
79,254 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Merrimack Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
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Three Months Ended March 31, |
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|||||
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(in thousands) |
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2019 |
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2018 |
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||
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Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(10,458 |
) |
|
$ |
(17,782 |
) |
|
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
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Non-cash interest expense |
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121 |
|
|
|
— |
|
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Depreciation and amortization expense |
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|
1,219 |
|
|
|
1,239 |
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Gain on sale of property and equipment |
|
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(574 |
) |
|
|
— |
|
|
Premiums paid on marketable securities |
|
|
— |
|
|
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(51 |
) |
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Amortization and accretion on marketable securities |
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(216 |
) |
|
|
(141 |
) |
|
Stock-based compensation expense |
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|
594 |
|
|
|
764 |
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Loss on equity method investment |
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|
301 |
|
|
|
746 |
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|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets |
|
|
(183 |
) |
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|
801 |
|
|
Accounts payable, accrued expenses and other |
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(4,456 |
) |
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(2,397 |
) |
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Deferred rent |
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— |
|
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(518 |
) |
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Net cash used in operating activities |
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(13,652 |
) |
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|
(17,339 |
) |
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Cash flows from investing activities |
|
|
|
|
|
|
|
|
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Purchase of property and equipment |
|
|
— |
|
|
|
(16 |
) |
|
Proceeds on sale of property and equipment |
|
|
615 |
|
|
|
— |
|
|
Proceeds from maturities and sales of marketable securities |
|
|
29,500 |
|
|
|
— |
|
|
Purchases of marketable securities |
|
|
— |
|
|
|
(41,818 |
) |
|
Net cash provided by (used in) investing activities |
|
|
30,115 |
|
|
|
(41,834 |
) |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
|
16,463 |
|
|
|
(59,173 |
) |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
20,663 |
|
|
|
94,217 |
|
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
37,126 |
|
|
$ |
35,044 |
|
|
Non-cash investing activities |
|
|
|
|
|
|
|
|
|
Purchases of property and equipment in accounts payable, accrued expenses and other |
|
$ |
— |
|
|
$ |
114 |
|
|
Supplemental disclosure of cash flows |
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
10 |
|
|
|
|
|
|
|
Cash paid for interest |
|
|
361 |
|
|
|
— |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Merrimack Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Nature of the Business
Merrimack Pharmaceuticals, Inc. (the “Company”) is an early stage biopharmaceutical company based in Cambridge, Massachusetts focused on outthinking cancer by targeting biomarker-defined cancers. The Company’s vision is to ensure that cancer patients and their families live fulfilling lives. The Company’s mission is to transform cancer care through the smart design and development of targeted solutions based on a deep understanding of cancer pathways and biological markers. The Company owns worldwide development and commercial rights to all of its programs.
On April 3, 2017, the Company completed the sale (the “Asset Sale”) to Ipsen S.A. (“Ipsen”) of its right, title and interest in the non-cash assets, equipment, inventory, contracts and intellectual property primarily related to or used in the Company’s business operations and activities involving or relating to developing, manufacturing and commercializing ONIVYDE®, its first commercial product, and MM-436. In connection with the Asset Sale, the Company is eligible to receive up to $450.0 million in additional regulatory approval-based milestone payments. The Company also retained the right to receive net milestone payments that may become payable for the ex-U.S. development and commercialization of ONIVYDE for up to $33.0 million pursuant to a license and collaboration agreement (the “Servier Agreement”) between Ipsen and Les Laboratoires Servier SAS (as assignee from Shire plc). The Company entered into the Servier Agreement in 2014, and on April 3, 2017, the Servier Agreement was assigned to Ipsen in connection with the completion of the Asset Sale. To date, the Company has received $28.0 million of the potential $33.0 million in milestone payments under the Servier Agreement.
On November 7, 2018, the Company announced that it had retained external advisors to explore strategic alternatives.
On April 4, 2019, the Company announced that it is discontinuing development of its sole clinical stage program, MM-310, its antibody-directed nanotherapeutic for the treatment of solid tumors. This decision was the result of a comprehensive review of available safety data from its Phase 1 clinical trial of MM-310. Based on emerging data since the amendment of the clinical protocol in late 2018, the Company concluded that the trial would not be able to reach an optimal therapeutic index for MM-310.
On April 4, 2019, the Company also announced that it expects to initiate a workforce reduction as it closes out clinical activities, reflective of its narrowed preclinical pipeline and in line with prior cost-cutting measures.
On April 4, 2019, the Company also announced that, in light of its ongoing strategic process, the Company intends to continue to prudently advance its preclinical immuno-oncology pipeline: MM-401, an agonistic antibody targeting a novel immuno-oncology target, TNFR2, and MM-201, a highly stabilized agonist-Fc fusion protein targeting death receptors 4 and 5.
The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including, among other things, its ability to secure additional capital to fund operations, success of clinical trials, development by competitors of new technological innovations, dependence on collaborative arrangements, protection of proprietary technology, compliance with government regulations and dependence on key personnel. In addition, the Company is engaged in a process to explore its strategic alternatives, which could result in potential changes to its current business strategy and future operations, but the Company cannot be sure when or if this process will result in any type of transaction or any other specific action by it.
The Company’s product candidates are in preclinical development, and none are approved for any indication by the U.S. Food and Drug Administration (“FDA”) or any other regulatory agency. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies, among others. In addition, the Company is dependent upon the services of its employees and consultants.
6
In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. As of March 31, 2019, the Company had an accumulated deficit of $533.7 million. During the three months ended March 31, 2019, the Company incurred a net loss of $10.5 million and used $13.7 million of cash in operating activities. The Company expects to continue to generate operating losses in the foreseeable future. The Company expects that its cash, cash equivalents and marketable securities of $58.5 million at March 31, 2019 will be sufficient to fund its operating expenses, debt service obligations and capital expenditure requirements for at least the next 12 months from issuance of the financial statements. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.
The Company will ultimately need to seek additional funding through public or private equity or debt financings, through existing or new collaboration arrangements, or through divestitures of its assets. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into additional collaborative arrangements or divest its assets. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Arrangements with collaborators or others may require the Company to relinquish rights to certain of its technologies or product candidates. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate its research and development programs, which could adversely affect its business prospects.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements reflect the operations of Merrimack Pharmaceuticals, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.
The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
Consolidation
The accompanying condensed consolidated financial statements reflect Merrimack Pharmaceuticals, Inc. and its wholly owned subsidiaries.
Unaudited Interim Financial Information
The condensed consolidated balance sheet as of December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by GAAP. The condensed consolidated balance sheet as of March 31, 2019, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2019 and 2018, the condensed consolidated statements of stockholders’ equity for the three months ended March 31, 2019 and 2018 and the condensed consolidated statements of cash flows for the three months ended March 31, 2019 and 2018 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2019, the results of its operations for the three months ended March 31, 2019 and 2018, its statements of stockholders’ equity for the three months ended March 31, 2019 and 2018 and its statements of cash flows for the three months ended March 31, 2019 and 2018. The financial data and other information disclosed in the notes related to the three months ended March 31, 2019 and 2018 are unaudited. The results for the three months ended March 31, 2019 and 2018 are not necessarily indicative of results to be expected for the year ending December 31, 2019, any other interim periods, or any future year or period.
The unaudited interim financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 6, 2019.
7
Condensed Consolidated Statements of Cash Flows
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows:
|
(in thousands) |
|
March 31, 2019 |
|
|
March 31, 2018 |
|
||
|
Cash and cash equivalents |
|
$ |
36,542 |
|
|
$ |
34,268 |
|
|
Restricted cash in prepaid expenses and other current assets |
|
|
— |
|
|
|
102 |
|
|
Restricted cash (short-term) |
|
|
584 |
|
|
|
— |
|
|
Restricted cash (long-term) |
|
|
— |
|
|
|
674 |
|
|
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statement of cash flows |
|
$ |
37,126 |
|
|
$ |
35,044 |
|
Restricted cash on the statement of financial position for 2019 and 2018 primarily represents amounts pledged as collateral for operating lease obligations as contractually required.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates, assumptions and judgments reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.
Marketable Securities
Marketable debt securities consist of investments with original maturities greater than 90 days at their acquisition date. The Company classifies all of its marketable debt securities as available-for-sale securities. The Company’s marketable debt securities are measured and reported at fair value using quoted prices in active markets for similar securities. Unrealized gains and losses on available-for-sale securities are reported as accumulated other comprehensive loss, which is a separate component of stockholders’ equity. The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income and expenses, net in the consolidated statements of operations and comprehensive loss.
The Company evaluates its marketable debt securities with unrealized losses for other-than-temporary impairment. When assessing marketable debt securities for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.
3. Leases
The Company adopted the new leasing standards on January 1, 2019, using the modified retrospective transition method, which does not require restatement of prior periods, for all the leases existing as of the adoption date. The adoption of the new leasing standards did not have a significant impact on the Company’s consolidated financial statements. As of January 1, 2019, the Company’s only existing lease is the lease of its principal research and office space located at One Kendall Square in Cambridge, Massachusetts, which expires in June 2019.
As of March 31, 2019, the Company has recorded a right-of-use asset of $1.0 million, within prepaid expenses and other current assets on its condensed consolidated balance sheet, which represents the Company’s right to use the underlying asset for the lease term. The Company also recorded a lease liability of $1.6 million, within accounts payable, accrued expenses and other, which represents the Company’s obligation to make lease payments arising from the associated lease. The right-of-use asset and lease liability are calculated using the present value of the lease payments over the expected lease term discounted at an incremental borrowing rate that the Company would expect to incur for a fully collateralized loan over a similar term under similar economic conditions. Certain adjustments to the right-of-use asset are required for items such as initial direct costs, prepaid rent and lease incentives.
8
4. Fair Value of Financial Instruments
Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is determined based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect certain market assumptions. As a basis for considering such assumptions, GAAP establishes a three-tier value hierarchy, which prioritizes the inputs used to develop the assumptions and for measuring fair value as follows: Level 1 observable inputs such as quoted prices in active markets for identical assets; Level 2 inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3 unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.
The following tables show assets measured at fair value on a recurring basis as of March 31, 2019 and December 31, 2018:
|
|
|
March 31, 2019 |
|
|||||||||
|
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
32,440 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Totals |
|
$ |
32,440 |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
$ |
— |
|
|
$ |
1,997 |
|
|
$ |
— |
|
|
Commercial paper |
|
|
— |
|
|
|
16,930 |
|
|
|
— |
|
|
Government securities |
|
|
— |
|
|
|
2,997 |
|
|
|
— |
|
|
Totals |
|
$ |
— |
|
|
$ |
21,924 |
|
|
$ |
— |
|
|
|
|
December 31, 2018 |
|
|||||||||
|
(in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
16,292 |
|
|
$ |
— |
|
|
$ |
— |
|
|
Commercial paper |
|
|
— |
|
|
|
1,998 |
|
|
|
— |
|
|
Totals |
|
$ |
16,292 |
|
|
$ |
1,998 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
— |
|
|
$ |
31,766 |
|
|
$ |
— |
|
|
Corporate debt securities |
|
|
— |
|
|
|
7,479 |
|
|
|
— |
|
|
Government securities |
|
|
— |
|
|
|
11,954 |
|
|
|
— |
|
|
Totals |
|
$ |
— |
|
|
$ |
51,199 |
|
|
$ |
— |
|
During the three months ended March 31, 2019 and the year ended December 31, 2018, there were no transfers between Level 1 and Level 2. The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities were determined through third-party pricing services.
The Company’s cash, restricted cash, prepaid expenses and other current assets, accounts payable, accrued expenses and variable interest rate note payable are recorded at cost, which approximates fair value due to their short-term nature
9
5. Marketable Securities and Cash Equivalents
The following table summarizes the Company’s marketable securities and cash equivalents as of March 31, 2019 and December 31, 2018:
|
|
|
March 31, 2019 |
|
|||||||||||||
|
(in thousands) |
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
||||
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
32,440 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
32,440 |
|
|
Total cash equivalents |
|
$ |
32,440 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
32,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate debt securities |
|
$ |
1,997 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
1,997 |
|
|
Commercial paper |
|
|
16,930 |
|
|
|
— |
|
|
|
— |
|
|
|
16,930 |
|
|
Government securities |
|
|
2,997 |
|
|
|
— |
|
|
|
— |
|
|
|
2,997 |
|
|
Total marketable securities |
|
$ |
21,924 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
21,924 |
|
|
Total cash equivalents and marketable securities |
|
$ |
54,364 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
54,364 |
|
|
|
|
December 31, 2018 |
|
|||||||||||||
|
(in thousands) |
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
||||
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
16,292 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
16,292 |
|
|
Commercial paper |
|
|
1,998 |
|
|
|
— |
|
|
|
— |
|
|
|
1,998 |
|
|
Total cash equivalents |
|
$ |
18,290 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial paper |
|
$ |
31,766 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
31,766 |
|
|
Corporate debt securities |
|
|
7,487 |
|
|
|
— |
|
|
|
(8 |
) |
|
|
7,479 |
|
|
Government securities |
|
|
11,955 |
|
|
|
— |
|
|
|
(1 |
) |
|
|
11,954 |
|
|
Total marketable securities |
|
$ |
51,208 |
|
|
$ |
— |
|
|
$ |
(9 |
) |
|
$ |
51,199 |
|
6. Notes Payable
Through March 31, 2019, the Company borrowed $15.0 million under the Loan and Security Agreement (the “Loan Agreement”) by and among the Company, certain subsidiaries of the Company from time to time party thereto, the several banks and other financial institutions or entities from time to time parties thereto (collectively referred to as “Lender”) and Hercules Capital, Inc. (“Hercules”), in its capacity as administrative agent and collateral agent for itself and Lender, and incurred $0.4 million of related debt discount and issuance costs, inclusive of the $0.3 million fee paid upon closing. The debt discount and issuance costs are being accreted to the principal amount of debt and being amortized from the date of issuance through August 1, 2021 to interest expense using the effective-interest method. In addition, the Company accrues the related 5.55% final fee payment of $0.8 million due at maturity to outstanding debt by charges to interest expense using the effective-interest method over the same period. The effective interest rate of the outstanding debt under the Loan Agreement is approximately 12.7%.
As of March 31, 2019, note payable consisted of the following:
|
(in thousands) |
|
March 31, 2019 |
|
|
|
Note payable |
|
$ |
15,000 |
|
|
Less: current portion |
|
|
(1,475 |
) |
|
Note payable, net of current portion |
|
|
13,525 |
|
|
Debt discount, net of accretion |
|
|
(255 |
) |
|
Accretion related to final payment |
|
|
249 |
|
|
Note payable, net of discount and current portion |
|
$ |
13,519 |
|
10
During the three months ended March 31, 2019, the Company recognized $0.5 million of interest expense related to the Loan Agreement. No interest expense was associated with the Loan Agreement for the three months ended March 31, 2018.
Estimated future principal payments due under the Loan Agreement are as follows as of March 31, 2019:
|
(in thousands) |
|
Note Principal Payments |
|
|
|
Remainder of 2019 |
|
$ |
— |
|
|
2020 |
|
|
8,394 |
|
|
2021 |
|
|
6,606 |
|
|
Total minimum note principal payments |
|
$ |
15,000 |
|
7. Accounts Payable, Accrued Expenses and Other
Accounts payable, accrued expenses and other as of March 31, 2019 and December 31, 2018 consisted of the following:
|
(in thousands) |
|
March 31, 2019 |
|
|
December 31, 2018 |
|
||
|
Accounts payable |
|
$ |
841 |
|
|
$ |
1,034 |
|
|
Accrued goods and services |
|
|
2,421 |
|
|
|
2,082 |
|
|
Accrued clinical trial costs |
|
|
1,919 |
|
|
|
1,683 |
|
|
Accrued drug purchase costs |
|
|
1,114 |
|
|
|
4,245 |
|
|
Accrued payroll and related benefits |
|
|
833 |
|
|
|
2,315 |
|
|
Accrued restructuring expenses |
|
|
209 |
|
|
|
921 |
|
|
Income taxes payable |
|
|
83 |
|
|
|
83 |
|
|
Deferred tax incentives |
|
|
1,314 |
|
|
|
1,314 |
|
|
Lease liability |
|
|
1,605 |
|
|
|
— |
|
|
Total accounts payable, accrued expenses and other |
|
$ |
10,339 |
|
|
$ |
13,677 |
|
8. Stock-Based Compensation
The Company’s 2011 Stock Incentive Plan (the “2011 Plan”) is administered by the Company’s Board of Directors and permits the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards.
There were no options granted during the three months ended March 31, 2019. At March 31, 2019, there were 0.8 million shares remaining available for grant under the 2011 Plan.
The Company recognized stock-based compensation expense during the three months ended March 31, 2019 and 2018 as follows:
|
|
|
Three Months Ended March 31, |
|
|
|||||
|
(in thousands) |
|
2019 |
|
|
2018 |
|
|
||
|
Employee awards: |
|
|
|
|
|
|
|
|
|
|
Research and development expense |
|
$ |
183 |
|
|
$ |
334 |
|
|
|
General and administrative expense |
|
|
411 |
|
|
|
430 |
|
|
|
Total stock-based compensation expense |
|
$ |
594 |
|
|
$ |
764 |
|
|
9. Net Loss Per Common Share
Basic net loss per share is calculated by dividing the net loss attributable to Merrimack Pharmaceuticals, Inc. by the weighted-average number of common shares outstanding during the period.
Diluted net loss per share is computed by dividing the net loss attributable to Merrimack Pharmaceuticals, Inc. by the weighted-average number of dilutive common shares outstanding during the period. Dilutive shares outstanding is calculated by adding to the
11
weighted shares outstanding any potential (unissued) shares of common stock from outstanding stock options based on the treasury stock method. In a period when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods where a loss is reported, there is no difference in basic and dilutive loss per share.
The Company follows the two-class method when computing net loss per share when it has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participating rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based on their respective rights to receive dividends, as if all income for the period has been distributed or losses to be allocated if they are contractually required to fund losses. There were no amounts allocated to participating securities for the three months ended March 31, 2019 and 2018, as the Company was in a loss position and had no shares that met the definition of participating securities outstanding as of March 31, 2019 and 2018.
Stock options are excluded from the calculation of diluted loss per share because the net loss for the three months ended March 31, 2018 causes such securities to be anti-dilutive. Outstanding options excluded from the calculation of diluted loss per share for the three months ended March 31, 2019 and 2018 are shown in the chart below:
|
|
|
Three Months Ended March 31, |
|
|
|||||
|
(in thousands) |
|
2019 |
|
|
2018 |
|
|
||
|
Outstanding options to purchase common stock |
|
|
2,148 |
|
|
|
2,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Restructuring Activities
On November 7, 2018, the Company announced that it was implementing a reduction in headcount as part of a corporate restructuring. The corporate restructuring followed a comprehensive review of the Company’s drug candidate pipeline. Under this corporate restructuring, the Company recognized total restructuring expenses of $1.3 million for the year ended December 31, 2018 consisting of one-time employee termination benefits of $1.0 million recorded in research and development expense and $0.3 million recorded in general and administrative expense. These one-time employee termination benefits are comprised of severance, benefits and related costs, all of which are expected to result in cash expenditures. Approximately $0.4 million of these payments were made during the fourth quarter of 2018 and the accrued remaining payments at December 31, 2018 were approximately $0.9 million.
During the three months ended March 31, 2019, the Company recognized additional restructuring expenses of $0.3 million consisting of one-time employee termination benefits of $0.2 million recorded in research and development expense and $0.1 million recorded in general and administrative expense. These one-time employee termination benefits are comprised of severance, benefits and related costs, all of which are expected to result in cash expenditures. During the three months ended March 31, 2019, the Company paid approximately $1.0 million of these restructuring expenses. The remaining payments of $0.2 million will be paid during the three months ended June 30, 2019.
The following table summarizes the charges related to the restructuring activities as of March 31, 2019 and 2018:
|
(in thousands) |
|
Accrued Restructuring Expenses at December 31, 2018 |
|
|
Expenses |
|
|
Less: Payments |
|
|
Accrued Restructuring Expenses at March 31, 2019 |
|
||||
|
Severance, benefits and related costs due to workforce reduction |
|
$ |
921 |
|
|
$ |
347 |
|
|
$ |
(1,059 |
) |
|
$ |
209 |
|
|
Totals |
|
$ |
921 |
|
|
$ |
347 |
|
|
$ |
(1,059 |
) |
|
$ |
209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
Accrued Restructuring Expenses at December 31, 2017 |
|
|
Expenses |
|
|
Less: Payments |
|
|
Accrued Restructuring Expenses at March 31, 2018 |
|
||||
|
Severance, benefits and related costs due to workforce reduction |
|
$ |
628 |
|
|
$ |
— |
|
|
$ |
(377 |
) |
|
$ |
251 |
|
|
Totals |
|
$ |
628 |
|
|
$ |
— |
|
|
$ |
(377 |
) |
|
$ |
251 |
|
12
11. Investment in Silver Creek
On August 20, 2010, the Company acquired a controlling financial interest in Silver Creek Pharmaceuticals, Inc. (“Silver Creek”). At such time, the Company had the ability to direct the activities of Silver Creek that most significantly impacted Silver Creek’s economic performance through its ownership percentage and through the board of director seats controlled by the Company. As such, Silver Creek was consolidated by the Company. Since the Company acquired its financial interest, Silver Creek has raised funding through the issuance of preferred stock and convertible promissory notes. The Company has not participated in any Silver Creek financings nor has it provided any funding.
During the third quarter of 2017, Silver Creek completed its Series C preferred stock financing, reducing the Company’s ownership percentage in Silver Creek below 50% and resulting in the Company no longer controlling the Silver Creek board of directors. Accordingly, the Company determined that it was no longer the primary beneficiary of Silver Creek and deconsolidated Silver Creek from its financial statements on July 13, 2017. Starting on July 14, 2017, the Company accounted for its investment in Silver Creek under the equity method of accounting since the Company has the ability to exercise significant influence over Silver Creek. Under the equity method of accounting, the Company has recorded its proportionate share of Silver Creek’s losses in its results of operations with a corresponding decrease in the carrying value of the investment. As of March 31, 2019, the carrying value of the Company’s investment in Silver Creek was $7.1 million. There can be no guarantee that the value of the Company’s investment in Silver Creek will not realize a substantial future loss or complete loss of value. The Company reviews the investment for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable. These circumstances can include, but are not limited to, negative current events or long-term outlooks impacting Silver Creek and/or its programs, planned or announced delays in the clinical development process to advance its programs, a current fair value of investment at a lower value than the Company’s investment and/or investors no longer providing financial support or reducing their financial commitment to Silver Creek.
Silver Creek continues to be a related party to the Company after deconsolidation.
12. Recent Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”), which establishes principles that lessees and lessors shall apply to report useful information to users of financial statements about the amount, timing and uncertainty of cash flows arising from a lease. The most notable change will be lessees recognizing an asset and liability on their balance sheet for operating leases. In 2018, the FASB issued ASU 2018-01 and ASU 2018-11, which collectively add two practical expedients, provide a second modified retrospective transition method which does not require retrospective adjustment of prior periods, and provide certain narrow scope improvements to the new lease guidance. ASU 2016-02 and the amending ASU’s are effective for the Company for annual periods beginning after December 15, 2018 and interim periods therein, with early adoption permitted. The Company adopted the new guidance as of January 1, 2019 using the modified retrospective transition method, which does not require restatement of prior periods, for all leases existing as of the adoption date. As described in Note 3, “Leases,” the adoption of this new guidance did not have a material impact on the Company’s condensed consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which represents a new credit loss standard that will change the impairment model for most financial assets and certain other financial instruments. Specifically, this guidance will require entities to utilize a new “expected loss” model as it relates to trade and other receivables. In addition, entities will be required to recognize an allowance for estimated credit losses on available-for-sale debt securities, regardless of the length of time that a security has been in an unrealized loss position. This guidance will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, and early adoption is permitted. The Company is currently evaluating the potential impact that the adoption of this guidance may have on the condensed consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13, “Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement” (“ASU 2018-13”). This standard eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods and early adoption is permitted. The Company is currently evaluating the impact of its adoption of ASU 2018-13 on its condensed consolidated financial statements.
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From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed above, the Company does not believe that the adoption of recently issued standards has or may have a material impact on the Company’s condensed consolidated financial statements or disclosures.
13. Subsequent Events
On April 4, 2019, the Company announced that it is discontinuing development of its sole clinical stage program, MM-310, its antibody-directed nanotherapeutic for the treatment of solid tumors. This decision was the result of a comprehensive review of available safety data from its Phase 1 clinical trial of MM-310. Based on emerging data since the amendment of the clinical protocol in late 2018, the Company concluded that the trial would not be able to reach an optimal therapeutic index for MM-310.
On April 4, 2019, the Company also announced that it expects to initiate a workforce reduction as it closes out clinical activities, reflective of its narrowed preclinical pipeline and in line with prior cost-cutting measures. On April 30, 2019 the Company announced that it committed to a course of action to implement a reduction in headcount, after which the Company expects to have approximately 13 employees. The reduction in headcount is primarily focused on the Company’s clinical organization as a result of the discontinuation of development of MM-310. The Company estimates it will incur expenses for one-time termination benefits in connection with this corporate restructuring of approximately $1.5 million to $1.7 million for employee severance, benefits and related costs, all of which are expected to result in cash expenditures, inclusive of Sergio L. Santillana, the Chief Medical Officer of the Company, who provided notice of his resignation effective as of April 12, 2019. The reduction in headcount is expected to be substantially completed by May 31, 2019 and fully completed by July 2019.
On April 15, 2019, the Company prepaid in full all principal, accrued and unpaid interest, fees, costs and expenses under the Loan Agreement with Hercules in an aggregate amount equal to $16.0 million (the “Payoff Amount”). The Company had previously borrowed $15.0 million under the Loan Agreement. The Payoff Amount includes a prepayment penalty of $0.2 million. In connection with the payment of the Payoff Amount, all liens and security interests granted to secure the obligations under the Loan Agreement and all guaranties of the obligations under the Loan Agreement terminated.
On May 7, 2019, the Company sold its equity position in Silver Creek for $7.8 million.
In May 2019, the Company auctioned laboratory equipment from the Company’s research and development operations, resulting in approximately $1.3 million in cash.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the notes to those financial statements appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2018 included in our Annual Report on Form 10-K. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth in Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q, which are incorporated herein by reference, our actual results may differ materially from those anticipated in these forward-looking statements.
Overview
We are an early stage biopharmaceutical company based in Cambridge, Massachusetts focused on outthinking cancer by targeting biomarker-defined cancers. Our vision is to ensure that cancer patients and their families live fulfilling lives. Our mission is to transform cancer care through the smart design and development of targeted solutions based on a deep understanding of cancer pathways and biological markers. We own worldwide development and commercial rights to all of our programs.
On April 3, 2017, we completed the sale, or the asset sale, to Ipsen S.A., or Ipsen, of our right, title and interest in the non-cash assets, equipment, inventory, contracts and intellectual property primarily related to or used in our business operations and activities involving or relating to developing, manufacturing and commercializing ONIVYDE®, our first commercial product, and MM-436, or the commercial business. In connection with the asset sale, we are eligible to receive up to $450.0 million in additional regulatory approval-based milestone payments. We also retained the right to receive net milestone payments that may become payable for the ex-U.S. development and commercialization of ONIVYDE for up to $33.0 million pursuant to a license and collaboration agreement, or the Servier agreement, between Ipsen and Les Laboratoires Servier SAS, or Servier, (as assignee from Shire plc). We entered into the Servier agreement in 2014, and on April 3, 2017, the Servier agreement was assigned to Ipsen in connection with the completion of the asset sale. To date, we have received $28.0 million of the potential $33.0 million in milestone payments under the Servier agreement.
On November 7, 2018, we announced that we have retained external advisors to explore strategic alternatives. We have recently implemented a series of measures intended to preserve our current resources as part of this ongoing process.
On April 4, 2019, we announced that we are discontinuing development of our sole clinical stage program, MM-310, our antibody-directed nanotherapeutic for the treatment of solid tumors. This decision was the result of a comprehensive review of available safety data from our Phase 1 clinical trial of MM-310, designed to evaluate safety and preliminary activity of MM-310 in patients with solid tumors and to identify the maximum tolerated dose. Based on emerging data since the amendment of the clinical protocol in late 2018, we concluded that the trial would not be able to reach an optimal therapeutic index for MM-310.
On April 4, 2019, we also announced that we expect to initiate a workforce reduction as we close out clinical activities, reflective of our narrowed preclinical pipeline and in line with prior cost-cutting measures. On April 30, 2019, we announced that we committed to a course of action to implement a reduction in headcount, after which we expect to have approximately 13 employees. The reduction in headcount is primarily focused on our clinical organization as a result of the discontinuation of development of MM-310.
On April 15, 2019, we prepaid in full all principal, accrued and unpaid interest, fees, costs and expenses under our Loan and Security Agreement, or loan agreement, with Hercules Capital, Inc., or Hercules, in an aggregate amount equal to $16.0 million.
In May 2019, we monetized certain assets to strengthen our cash position. This includes the sale of our equity position in Silver Creek Pharmaceuticals, Inc., or Silver Creek, resulting in $7.8 million in cash, and the auction of laboratory equipment from our research and development operations, resulting in approximately $1.3 million in cash.
We are operating with a narrow research footprint, focused on two preclinical programs: MM-401, an agonistic antibody targeting a novel immuno-oncology target, TNFR2; and MM-201, a highly stabilized agonist-Fc fusion protein targeting death receptors 4 and 5. We plan to prudently advance these programs, with deference to our ongoing strategic process.
We have devoted substantially all of our resources to our drug discovery and development efforts, including conducting clinical trials for our product candidates, protecting our intellectual property and providing general and administrative support for these operations. We currently have no products approved for sale. We have financed our operations primarily through private placements of convertible preferred stock, collaborations, public offerings of our securities, secured debt financings, sales of ONIVYDE and the asset sale.
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As of March 31, 2019, we had unrestricted cash and cash equivalents and marketable securities of $58.5 million. We believe that our financial resources as of March 31, 2019, net of our April 15, 2019 $16.0 million debt prepayment (see Note 13, “Subsequent Events,” in the accompanying notes to the condensed consolidated financial statements), and as a result of the corporate restructurings announced on November 7, 2018 and April 30, 2019, together with other restructuring and cost cutting measures that we could implement in the future, provide us with the potential to fund our operations into at least the second half of 2022.
We have never been profitable and, as of March 31, 2019, we had an accumulated deficit of $533.7 million. Our net loss was $10.5 million and $17.8 million for the three months ended March 31, 2019 and 2018, respectively. As a result of the refocusing of our research and development efforts, as well as completing the closeout of our SHERLOC, SHERBOC and MM-310 clinical trials (see Note 13, “Subsequent Events,” in the accompanying notes to the condensed consolidated financial statements), we expect our research and development expenses to decrease in the year ending December 31, 2019 as compared to the year ended December 31, 2018, as well as for the foreseeable future as we continue to narrow development of our preclinical programs. Until such time, if ever, as we can generate sufficient product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, licensing arrangements and other marketing and distribution arrangements. We also could engage in discussions with third parties regarding partnerships, joint ventures, combinations or divestitures of one or more of o