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Analyst Blog

Merrimack Pharmaceuticals, Inc. (MACK - Free Report) is scheduled to report third-quarter 2016 results on Nov 9. Last quarter, Merrimack delivered a negative earnings surprise of 17.65%. Let’s see how things are shaping up for the company this quarter.

Factors Influencing the Quarter

Apart from license and collaboration fees, Merrimack’s top line comprises revenues generated by its only marketed product, Onivyde. The drug is approved in the U.S. (in Oct 2015), in combination with fluorouracil (5-FU) and leucovorin, for the treatment of metastatic adenocarcinoma of the pancreas in patients who were previously treated with Eli Lilly and Company’s (LLY - Free Report) Gemzar-based therapy.

Onivyde’s initial uptake has been encouraging. We expect the drug to contribute significantly to third-quarter revenues.

Merrimack’s efforts on commercializing Onivyde and driving awareness about the drug bode well. The company has also been engaged in visiting key institutions, educating physicians, and providing active patient and oncology practice support services.

Inclusion of the drug in the National Comprehensive Cancer Network (NCCN) clinical practice guidelines in Oncology for pancreatic adenocarcinoma should accelerate patient access. Moreover, its sales to major clinical institutions are expected to increase, going ahead.

In Jul 2016, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA) rendered a positive opinion on the approval of Onivyde. We expect the company to offer further details on the regulatory front during its third-quarter earnings call.

Meanwhile, Merrimack is working on expanding Onivyde’s label into other indications such as front-line pancreatic cancer, pediatric solid tumors and glioma. Investors are expected to remain focused on pipeline updates by the company.

Surprise History

Merrimack’s track record has been decent so far with a four-quarter average positive earnings surprise of 1.26%. The company has beaten estimates twice in the last four trailing quarters, met the same once and missed them in the remaining one quarter.

MERRIMACK PHAR Price and EPS Surprise

 

MERRIMACK PHAR Price and EPS Surprise | MERRIMACK PHAR Quote

What Our Model Indicates

Our proven model does not conclusively show that Merrimack 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 expectations. But 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 -23.33%. This is because the Most Accurate Estimate stands at a loss of 37 cents and the Zacks Consensus Estimate is pegged at a loss of 30 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Although the company’s Zacks Rank #2 enhances the predictive power of the ESP, its negative ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #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 a couple of health care stocks that you may want to consider instead, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

Tokai Pharmaceuticals, Inc. (TKAI - Free Report) is expected to release third-quarter results on Nov 8. The company has an Earnings ESP of is +18.42% and it carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Synergy Pharmaceuticals, Inc. (SGYP - Free Report) is expected to report third-quarter results on Nov 14. It has an Earnings ESP of +18.18% and a Zacks Rank #2.

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