3 Things to Watch at Merrimack

Merrimack Pharmaceuticals'  (NASDAQ: MACK  )  IPO debuted with a thud this past summer, falling 14% intraday from its $7 listing price. The biopharmaceuticals company focuses on innovative treatments for serious conditions with a primary focus on cancers. The product pipeline includes a promising lead drug and a secondary drug backed by Sanofi (NYSE: SNY  ) . But the company's trading nearly 13% below its list price.

Here are three things to watch when considering Merrimack.

1. Lead drug
MM-398 began phase 3 trials this past summer  for treatment-resistant pancreatic cancer. The Food and Drug Administration granted the drug orphan status. Additional early stage trials will examine its efficacy with colorectal cancer and gliomas -- or tumors beginning in the brain or spinal cord.

Transparency Market Research  estimates that the domestic pancreatic cancer market will hit $1.2 billion by 2015. The leading treatment has historically been Eli Lilly's (NYSE: LLY  )  chemo drug Gemzar. But a rising new wave of treatments, including Merrimack and Celgene's (NASDAQ: CELG  )  Abraxane, offers options for patients for whom Gemzar wasn't enough .

Merrimack paid up to have a chance in this market. The company acquired MM-398's original developer in 2009 . Last year, Merrimack agreed to pay up to $220 million in up-front and milestone payments to PharmaEngine for overseas marketing rights. PharmaEngine, the drug's collaborator, will retain rights in its home country of Taiwan.

2. Secondary drug
MM-121 is involved  in three phase 2 trials, one phase 1/2 trial, and four phase 1 trials. Those trials include several types of cancers such as breast and lung. It is an ambitious drug for a small company but benefits from having Sanofi as a backer.

Sanofi made a $60 million  up-front payment and a series of milestone payments for its share of MM-121. More milestones and potential royalty payments could follow. Sanofi is responsible for the manufacturing and development costs. Merrimack will participate through phase 2 and has the option to co-promote the drug in the U.S. upon its release.

3. Cash burn
Merrimack's cash burn for the most recent quarter was around $21 million . The company reported about $87 million  in cash, cash equivalents, and short-term investments. Combine that with a new loan agreement with a $40 million limit, and Merrimack can probably sustain itself until 2014, when revenues should start flowing.

Final thoughts
It will be some time before late-stage trials report and show a clearer picture of Merrimack's standing. MM-398 will need to show strength in a market that's becoming increasingly crowded. MM-121 could become the underdog champion, especially with Sanofi's contribution. It might benefit investors to take a "wait and see" approach with Merrimack until more data arrives.

Want a closer look at one of Merrimack's potential competitors? With Celgene's broad portfolio of drugs and a strong pipeline to boot, many investors see it as a smarter way to play the biotech investing game. While Celgene might be a safer stock than its small biotech brethren, investors need to know about the key opportunities and risks facing the company. We run through them all in The Motley Fool's brand-new premium report on Celgene. To claim your copy today, simply click here now.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 31, 2012, at 10:31 AM, kurtdabear wrote:

    If you think this company will be profitable by 2014, you're not a pharmaceutical investor. Everything costs twice as much as estimated and takes twice as long as projected, unless the government changes the rules of the game or makes you repeat a trial, in which case it becomes four times as much and four times as long. Drugs in Phase 2 trials are like minnows in a pool of piranha: Their survival rate is very low.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2170453, ~/Articles/ArticleHandler.aspx, 11/1/2014 8:42:53 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement