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Merrimack Pharmaceuticals, Inc. (MACK - Free Report) is slated to report fourth-quarter 2014 results on Feb 26, 2015.

The company missed estimates last quarter. On an average, Merrimack Pharma beat estimates in three of the last four trailing quarters with a negative earnings surprise of 93.70%. Let’s see how things are shaping up for this announcement.

Factors Influencing this Quarter

Being a development-stage biopharmaceutical company, Merrimack Pharma has not generated product revenue so far. In such a scenario, investor focus should remain on pipeline updates.

On its third-quarter call, Merrimack Pharma announced a revised timeline for submitting a new drug application for its most advanced candidate, MM-398 (metastatic pancreatic cancer). Since the company was asked by the FDA to improve an analytic assay for liposome product quality on the basis of a refined release specification, Merrimack Pharma is expected to file for the drug by the end of first-quarter or early second-quarter 2015 (previously expected to be submitted by the end of 2014).

We expect the company to throw light on the candidate’s development status on its fourth-quarter call.

Apart from metastatic pancreatic cancer, MM-398 is being evaluated for the treatment of colorectal cancer (phase II), glioma (phase I) and pediatric solid tumors (phase I). Moreover, Merrimack Pharma has a number of early- and mid-stage oncology candidates in its pipeline – MM-121, MM-111, MM-302, MM-151 and MM-141. Updates on these candidates are also expected.

Although we expect Merrimack Pharma to benefit from its Sep 2014 collaboration with Baxter International (BAX - Free Report) for the development of MM-398, we believe the company will continue to face an increase in its R&D expenditure.

What Our Model Indicates

Our proven model does not conclusively show that Merrimack Pharma is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat earnings. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% since the Most Accurate estimate is in line with the Zacks Consensus Estimate of a loss of 23 cents.

Zacks Rank: Merrimack Pharma carries a Zacks Rank #3. Though a Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes a surprise prediction difficult.

However, we caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

ACADIA Pharmaceuticals Inc. (ACAD - Free Report) has an Earnings ESP of +3.85% and carries a Zacks Rank #2. The company is scheduled to release its fourth-quarter 2014 results on Feb 26.

Amarin Corporation plc (AMRN - Free Report) has an Earnings ESP of +14.29% and carries a Zacks Rank #2. The company is scheduled to release its fourth-quarter 2014 results on Mar 3.

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