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Merrimack (MACK) Suffers Wider-Than-Expected Loss in Q2

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Merrimack Pharmaceuticals, Inc. (MACK - Free Report) incurred a loss of $1.33 per share for the second quarter of 2018, wider than the Zacks Consensus Estimate of a loss of $1.28 but narrower than the year-ago quarter’s loss of $2.18.

Merrimack sold its only marketed product, Onivyde, last year to Ipsen. The company could not generate any revenues in the reported quarter in absence of a marketed product in its portfolio.

Shares of Merrimack were up almost 3% following the release of second-quarter results. However, the stock has underperformed the industry so far this year, having plunged 48.5%, wider than the industry’s decline of 4.8%.

In the quarter under review, research and development expenses decreased 30.8% year over year to $13.7 million owing to Merrimack's refocused clinical and preclinical pipeline.

General and administrative expenses were down 76.4% year over year to $3.5 million due to reduced headcount levels following the sale of Onivyde to Ipsen.

Pipeline Updates

With the sale of Onivyde, Merrimack is back to being a development-stage biopharmaceutical company. Hence, it now focuses on developing its two early-stage pipeline candidates, namely MM-121 (seribantumab) and MM-310 (solid tumor).

MM-121 is currently being evaluated in two phase II studies. The phase II SHERLOC trial is evaluating MM-121 on advanced non-small cell lung cancer patients, who are heregulin positive. Top-line data from the analysis is expected in the second half of 2018.

A phase I program on MM-310 is under way to evaluate its safety regarding patients with solid tumors and to identify its maximum tolerated dose. The company anticipates to report safety data and the maximum tolerated dose from the study during the second half of 2018.

We remind investors that Merrimack faced a major pipeline setback in June 2018 when it terminated developing MM-141 post disappointing results from a phase II analysis, CARRIE, for the treatment of front-line metastatic pancreatic cancer. The evaluation failed to meet any primary and secondary efficacy endpoints in patients, who received MM-141 in combination with nab-paclitaxel and Gemzar as compared to nab-paclitaxel and Gemzar alone.

Outlook

The company had cash, cash equivalents and marketable securities of $60 million as of June 30, 2018. It received an additional $18-million milestone payment from Shire (SHPG - Free Report) on the sale of Onivyde in two major European countries. Merrimack is eligible to receive an aggregate of $450 million as milestone payments from Ipsen, subject to stockholder’s approval.

Merrimack also remains eligible to receive $5 million in relation to the sale of Onivyde in the first major non-European, non-Asian country and another $10 million for the first patient dosed for an indication other than pancreatic cancer.

In July, it received $14.7 million debt facility from Hercules Capital. Merrimack expects these milestone payments and the loan to effectively fund its current operating plans for at least through the first quarter of 2020.

Our Take

With no approved products in the company’s portfolio yet and multiple data readouts from clinical studies slated to happen this year, we expect investor focus to remain on the company’s pipeline updates.

Zacks Rank & Stocks to Consider

Merrimack currently carries a Zacks Rank #3 (Hold). Two better-ranked stocks in the healthcare sector are Gilead Sciences, Inc. (GILD - Free Report) and Illumina, Inc. (ILMN - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Gilead Sciences’ earnings estimates have been moved 7.7% north for 2018 and 2.2% for 2019 over the past 60 days. The stock has gained 9.4% year to date.

Illumina’s earnings estimates have been revised 10.9% upward for 2018 and 8% for 2019 over the past 60 days. The stock has soared 54.3% so far this year.

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