(Filing, Annual, Prima Biomed, 2016, OCT 3, 2016, View Source [SID:SID1234515551])

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On October 3, 2016, Merrimack Pharmaceuticals, Inc. (the "Company") announced that it was implementing a 22% reduction in headcount as part of a major corporate restructuring with the objective of prioritizing its research and development on a focused set of systems biology-derived oncology products and strengthening its financial runway (Filing, 8-K, Merrimack, OCT 3, 2016, View Source [SID:SID1234515609]). The reduction in headcount will not impact the Company’s commercial team or the execution of ONIVYDE’s commercial launch and label expansion. The Company estimates that it will incur charges for one-time termination benefits in connection with this corporate restructuring of approximately $4.5 million to $5.5 million for employee severance, benefits and related costs, all of which are expected to result in cash expenditures.

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The Company’s Board of Directors (the "Board") committed to this course of action on September 29, 2016. The reduction in personnel was substantially completed on October 3, 2016 and is expected to be fully completed by December 3, 2016.
Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
On October 3, 2016, in connection with the appointment of Gary Crocker as interim President and Chief Executive Officer as described in more detail under Item 5.02 of this Form 8-K, Mr. Crocker resigned from the Audit Committee of the Board. As a result, the Audit Committee is currently comprised of only two members, James Quigley and Russell Ray. The Company expects the Board to appoint a new member of the Audit Committee promptly. In the meantime, the Company is relying upon the cure period under Nasdaq Listing Rule 5605(c)(4)(A) with respect to this vacancy on the Audit Committee and the related requirement under Nasdaq Listing Rule 5605(c)(2)(A) that the Audit Committee be comprised of at least three members. The Company provided a related notice to the Nasdaq Stock Market on October 3, 2016.

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b) On October 3, 2016, Robert J. Mulroy, the President, Chief Executive Officer and a director of the Company, resigned from each of such positions.

(c) Effective October 3, 2016, the Board appointed Gary Crocker, the Company’s Chairman of the Board, as the interim President and Chief Executive Officer of the Company. Mr. Crocker, age 64, has served as a member of the Board since 2004 and as Chairman of the Board since 2005. Mr. Crocker has served as President and Managing Director of Crocker Ventures, LLC, a privately-held life science investment firm funding differentiated biotechnology and medical device companies, since 2002. Mr. Crocker has held senior executive positions or served on the board of directors of several life science companies, including as Chairman of the Board of ARUP Laboratories, co-founder and director of Theratech, Inc. (acquired by Actavis plc) and President, Chief Executive Officer and founder of Research Medical, Inc. (acquired by Baxter International). Mr. Crocker also served on the boards of directors of the publicly traded firms Interleuken Genetics, Inc. and The Med-Design Corporation. Mr. Crocker served as a member
of the board of the Federal Reserve Branch of San Francisco from 1999 to 2007, and currently serves as the Chairman of the University of Utah’s Center for Medical Innovation and on the board of the Sorenson Legacy Foundation. Mr. Crocker holds an M.B.A. from Harvard Business School and a B.S. from Harvard College.

Mr. Crocker is not receiving any additional compensation for his service as interim President and Chief Executive Officer of the Company. Mr. Crocker is compensated for his service on the Board pursuant to the existing terms of the Company’s director compensation policy.

(e) On October 3, 2016, the Company and Mr. Mulroy entered into a Separation and Release of Claims Agreement (the "Separation Agreement"). Pursuant to the Separation Agreement, in connection with Mr. Mulroy resigning as President, Chief Executive Officer and a director of the Company, the Company agreed to:

• commencing on the first regularly scheduled payroll date following December 2, 2016, continue paying Mr. Mulroy’s annual base salary of $598,689 for a period of twelve (12) months (the "Severance Period");

• continue paying the share of the premium for Mr. Mulroy’s health and dental insurance through the end of the Severance Period that it currently pays on behalf of active and similarly situated employees who receive the same type of coverage and/or to otherwise continue to provide to Mr. Mulroy during the Severance Period all Company employee benefit plans and arrangements available to the Company’s senior management employees; and

• on December 2, 2016, pay Mr. Mulroy a pro-rated bonus of $154,271.
The Separation Agreement also included a release of claims by Mr. Mulroy against the Company.

In addition, on October 3, 2016, the Company and Mr. Mulroy entered into a Consulting Agreement (the "Consulting
Agreement"), pursuant to which Mr. Mulroy will assist Mr. Crocker with the leadership transition of the Company, as directed by Mr. Crocker. Mr. Mulroy will be compensated at a rate of $300 per hour for his services under the Consulting Agreement. The term of the Consulting Agreement continues until October 2, 2019.

Either the Company or Mr. Mulroy may terminate the Consulting Agreement at any time, with or without cause. In the event the Company terminates the Consulting Agreement without cause (as defined therein), all unvested equity awards granted to Mr. Mulroy will immediately vest and remain exercisable in accordance with the applicable equity plans and award agreements.

On October 3, 2016, Clovis Oncology, Inc. ("Clovis") and Lonza Ltd ("Lonza") reported that it entered into a Manufacturing Services Agreement (the "Agreement") for the long term manufacture and supply of the active pharmaceutical ingredient ("API") for rucaparib (Press release, Clovis Oncology, OCT 3, 2016, View Source [SID:SID1234515608]). The terms and conditions of the Agreement are contingent upon the approval by the U.S. Food and Drug Administration of the initial New Drug Application for rucaparib, unless triggered earlier by Clovis. Clovis and Lonza are parties to a Development and Manufacturing Agreement, dated February 8, 2013, as amended, under which Lonza has supplied rucaparib API for clinical development.

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The Agreement provides that Lonza will be a non-exclusive manufacturer of the rucaparib API during the term of the Agreement, which expires on December 31, 2025, unless extended by mutual written consent of the parties. Under the Agreement, Lonza will construct, in an existing Lonza facility, a production train that will be exclusively dedicated to the manufacture of the rucaparib API. The dedicated production train will provide manufacturing capacity to meet Clovis’ currently anticipated needs for commercial supply of rucaparib API.

Clovis is obligated to make scheduled capital program fee payments towards capital equipment and other costs associated with the construction of the dedicated production train and, once the facility is operational, Clovis is obligated to pay a fixed facility fee each quarter for the duration of the Agreement.

Pursuant to the terms of the Agreement, Lonza will manufacture and store an advanced intermediate to be used in the subsequent production of the rucaparib API. Clovis will pay fixed fees on a per kilogram basis for quantities of the advanced intermediate and the rucaparib API ordered by Clovis under the Agreement, subject to certain adjustments. Until the dedicated facility is completed and operationally qualified, Lonza will manufacture the rucaparib API in existing Lonza facilities at pricing established in the Agreement.

Either party may terminate the Agreement due to a material breach of the Agreement by the other party, subject to prior written notice and a cure period. Clovis may terminate the Agreement, subject to 90 days’ prior written notice, in the event rucaparib is withdrawn from the market for certain reasons. In the event of such a termination by Clovis, or termination by Lonza due to material breach by Clovis, Clovis is obligated to compensate Lonza for any services rendered, or for which costs have been incurred by Lonza in anticipation of services to be provided to Clovis, and to pay to Lonza the remaining amount of any capital program fees and quarterly fixed facility fees for the remainder of the term of the Agreement. In the event the Agreement is terminated by Clovis due to material breach by Lonza, Lonza is obligated to repay all or a portion of the capital program fees previously paid by Clovis.

The foregoing is only a summary of certain provisions of the Agreement and is qualified in its entirety by the terms of the Agreement, a copy of which will be filed as an exhibit to Clovis’ annual report on Form 10-K for the year ending December 31, 2016. Clovis intends to submit a Confidential Treatment Request to the SEC pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended, requesting confidential treatment of certain portions of the Agreement.