Is Marina Biotech A Merger Candidate? Print E-mail
By Anthony Schwartz, Contributor   
Monday, 12 November 2012 08:46

icon_newsnotesThe biotech industry has essentially written off Marina Biotech, Inc. (PINK:MRNA) as a bankrupt & failed company; however, there may be something completely different going on behind the scenes.

 

In brief, Marina is focused on therapeutics utilizing RNA interference (RNAi), messenger RNA translational blocking and CRN-based oligonucleotides. Their clinical program includes a clinical trial for Familial Adenomatous Polyposis and preclinical programs for bladder and liver cancer. They also have a liposome delivery system, SMARTICLES®, which can be chemically modified to target specific tissues.

Throughout 2012, Marina has faced many shortcomings, such as being delisted from the Nasdaq and a depressed stock price. Ultimately, a lack of access to capital resulted in the company ceasing most day to day operations. This included furloughing approximately 90% of its employees. After the announcement, the stock plummeted from $0.90 down to the mid $0.20s.  By this point, most investors gave up on the company; however, I believe that this may have all been part of CEO Michael French’s master plan to bring value back to the technology. Michael had been faced with these same challenges during his tenure at SIRNA Therapeutics, where he then helped facilitate the sale of his company to Merck for nearly $1,000,000,000. So the big question is: What is really going on at Marina Biotech? I will go into several details found in the company’s SEC filings as well as several observations about the Company.

Partnerships:

For a supposedly bankrupt company with no future, Marina entered into several partnerships over the last year, many of which had lucrative milestone payments and future royalties on sales. For the pre-clinical bladder program, Marina entered into an exclusive agreement with The Debiopharm Group worth up to 25 million dollars.

The next agreement went to ProNAi Therapeutics to license Marina’s microRNA mimics, DNAi and SMARTICLES® technology. Marina could potentially receive up to 14 million dollars for each gene target. Those royalties are basically endless when you start talking about multiple gene targets for different diseases. Marina also licensed SMARTICLES®  to Mirna Therapeutics for use in their cancer therapeutics programs.

Shortly after these agreements, Marina announced it regained patent rights to several of its veterinary and agriculture intellectual property. Just days later, Marina announced exclusive licensing agreements for its technology with Monsanto. Although the terms of this agreement have not been disclosed, Marina has received at least two upfront payments totaling $1,500,000 as stated in their recent 10k.

Next, Marina announced an alliance with Girindus for the development and supply of CRN-based oligonucleotides for research and commercial applications. For a company that is supposedly shutting down operations, it’s interesting they have now lifted a huge financial burden of producing their technology.

Finally, Marina’s most recent agreement occurred in late August with Novartis for its CRN technology and subsequently received at least 1 million dollars upfront.

Evidence of a pending merger:

There have been several events and SEC filings in recent months that make me believe some sort of acquisition is in the works.  For instance, although never mentioned by Marina, several patents and patent applications have been issued/published throughout the summer. Some as recent as September 21st. Further investigation via the USPTO’s PAIR system reveals all kinds of activity on Marina’s patents. Why is a company with no money so diligently securing their intellectual property?

Next, on March 20, 2012, Marina Terminated its equity agreement with LPC valued at 15 million dollars. The question on everyone’s mind: Why would a cash strapped company terminate their most powerful lifeline? The answer may lie in subsequent SEC filings.

In a prospectus dated March 22 the company states: “If adequate funds are not available, we may have to delay, reduce or eliminate one or more of our research or development programs, reduce overall overhead expenses, or cease substantially all of our operations and seek to sell our company or our assets in a single transaction or series of transactions.” The first part of this statement has already come to fruition on June 1.

Marina also secured a bridge loan in the amount of $1,500,000 last winter. Payment for the loan (now due Dec. 31) has been delayed several times and the holders have been issued warrants to purchase stock at $0.28. If Marina had money on hand from Monsanto and Novartis, etc, why did they not pay the loan off with that money? What reason would the noteholders want stock over an upfront cash payment? Shown below is an excerpt from an 8k which details an amended arrangement with the noteholders should the company be acquired.

“whereby the Company and the Purchasers agreed that if the Company, at any time prior to December 31, 2012, effects any merger or consolidation of the Company whereby the holders of the issued and outstanding shares of the common stock, par value $0.006 per share, of the Company (the “Common Stock”), immediately prior to the consummation of such transaction hold less than fifty percent (50%) of the issued and outstanding shares of the voting securities of the surviving corporation immediately following the consummation of such transaction, the Companies will have fully satisfied their obligations to repay the entire unpaid principal balance under the Notes and all accrued and unpaid interest thereon.”

More recently, the structure of Marina has changed with the departure of several board members and the addition of Stefan Loren, PhD and Joseph Ramelli.  Dr. Loren is the Managing Director at Westwicke Partners and Mr. Ramelli has is an equity analyst at Eos Funds, Robert W. Duggan & Associates and Seneca Capital Management. Michael French said “ I look forward to working with Stefan and Joe as we take the Company through this transition". They will each be compensated with 50,000 shares of stock.  Why would they work for a company for common stock that is essentially worthless? What exactly is this “transition”?

The company also ended its lease of its 55,000 sq. foot laboratory space. In exchange for the early termination of the lease, the landlords agreed to approximately 1.5 million shares of common stock. The most recent 8k states “As additional consideration for the Termination Agreement, the Company agreed to issue 1,500,000 shares of its common stock to Landlord contingent upon and immediately prior to the first to occur of any of the following events: (ii) a merger of the Company with or into another entity if the combined market capitalization of the merging entities is at least $18 million or, if not, upon the market capitalization of the Company as the surviving entity of a merger being at least $18 million at any time after the merger”. Again, why would the landlord agree to give up $150k/month lease for common stock of a worthless company?

The recent 10k and press release further hint to the merger such as submitting the required SEC filings. French says, “In addition, we intend to complete our filings with the SEC as required within the next six weeks”. The 10k also states that they expect to enroll Cohort 3 in their clinical trial program as soon as they receive adequate funding. Why would a bankrupt company even bother filing the necessary SEC filings nor even be thinking about continuing a clinical trial?

The evidence seems overwhelming that a merger will occur in the near future. Some of French’s statements further help to clarify this possibility.

 "We continue to work hard to realize the true value of the nucleic acid platform we've created over the past years," stated J. Michael French.

“We believe the market price for our common stock may not accurately reflect the value of our business. While we will continue to seek to maximize the value of our business to our stockholders, the most attractive option for doing so may require us to consummate a transaction involving a merger or combination of our company with, or an acquisition of our company by, another entity. (10K)”

The big question now becomes: What is the company’s current (fair) value for such an acquisition?  There is of course the possibility that I am completely wrong the company goes under, but the evidence is overwhelming that this will probably not happen.

Disclosure: LONG MRNA.PK

I would like to thank Brian Thomson for his help in writing this article.

 




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