Cardiome Resolves Debt With Merck


As originally announced back in December, Cardiome Pharma Corp. reached an agreement with former Vernakalant development partner Merck to eliminate its outstanding US$50 million LT debt (half of a US$100 million line-of-credit, part of the US$800 million Vernakalant alliance announced in Apr/09), and on highly attractive terms requiring Cardiome to provide cash payment of only US$23 million, including repurchase US$3 million in Vernakalant finished goods and active ingredient inventory.

Vernakalant-based assets could eventually be sold or provide clinical-grade material for future human atrial fibrillation (AF) studies, but even if they do not, Cardiome was able to pay down debt obligations with at most US$0.46 on the dollar, and effectively preserve US$27 million in cash to fund ongoing activities. We calculate an effective cash balance of US$30.6 million, or US$0.50/sh (Q3/12 cash was $53.6 million, less US$23.0 million now paid in full to Merck), less Q4/12 cash burn that as a guess was in the US$3 million to US$4 million range.

Cardiome’s relationship with Merck has been far more negative to Vernakalant development than forgiving net US$27 million in debt can overcome, but it is nonetheless positive for Cardiome to eliminate all near-term financial risk from the firm before focusing on the clinical/regulatory challenges that remain.

These include the development status on IV Vernakalant in the U.S. and Asia, and specifically on the now-terminated 216-patient Phase III ACT V trial in the U.S. (we are hopeful that data from that trial still may be reviewed by the FDA within the context of other completed Phase III ACT trials) and the now-suspended 615-patient AF trial Merck was conducting in South Korea. It will also be necessary for Cardiome to identify new commercial partners in Europe for BRINAVESS.

However, more importantly, Cardiome clearly needs to identify new sources of capital and/or partnership interest to drive development forward on its oral Vernakalant program, a program that languished under Merck’s watch while it was, well, watching how Sanofi’s comparable drug Multaq/dronedarone was performing commercially (F2012 sales of €255 million were down 8% YoY) and how Multaq was performing in a key 10,800-patient Phase IV paroxysmal-persistent AF trial called PALLAS.

Multaq has an overlapping but distinct mechanism of action so it is not certain that Vernakalant would not show benefit in the larger paroxysmal-persistent AF population where Multaq did not, Sanofi’s Multaq sales data do show us that peak sales for an agent that only targets permanent AF are at most at half-blockbuster levels, and Multaq of course is already in the market and addressing this patient population.


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