Merrimack's stock was sliced in half in 2016. Image source: Getty Images.

What happened

While 2016 was a rough period for the biotech industry in general, shareholders of Merrimack Pharmaceuticals (MACK) had to suffer through an especially brutal period. Investors in the cancer-focused biotech had to stomach a 47% decline during the year, according to data from S&P Global Market Intelligence. That was a far worse decline than the 17% pullback that was rung up by the First Trust NYSE Arca Biotech ETF (FBT 0.53%).

MACK Chart

MACK data by YCharts.

So what

As the chart above indicates, Merrimack's stock gave its investors a wild ride during 2016. Here's a recap of the company's most important news items that drove the stock price during the year:

  • In March, Merrimack stated that the National Comprehensive Cancer Network had added the company's pancreatic cancer drug Onivyde to its 2016 clinical practice guidelines for treating patients with pancreatic adenocarcinoma.
  • In May, Merrimack and its partner Baxalta announced that they had kicked off a Phase 1 clinical study of MM-151 in combination with Onivyde plus fluorouracil and leucovorin as a hopeful treatment for RAS wild-type metastatic colorectal cancer.
  • In June, the company announced that the FDA had granted MM-121 Fast Track designation for treating non-small cell lung cancer.
  • In July, the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency issued a positive opinion on Onivyde. Merrimack also reaffirmed that Shire, which had acquired Baxalta in June, was on track to launch the drug in international markets should it go on to win approval.
  • In August, Merrimack reported that its revenue came in far ahead of Wall Street's expectations -- mostly caused by a big jump in collaboration revenues from Shire, not just product sales. Despite the big beat, however, Merrimack continued to post huge quarterly losses.
  • In October, Merrimack went through a major corporate restructuring. The company's CEO, Robert Mulroy, resigned, and 22% of the workforce was let go. Management said that the cuts would save the company more than $200 million over the following two years.
  • Also in October, Shire announced that it had officially won the green light from European regulators to market Onivyde.
  • In late December, Merrimack stated that it was stopping its phase 2 HERMIONE trial. This study was testing MM-302 as a hopeful treatment for metastatic breast cancer. Management said that the action was taken in response to a recommendation made by the independent Data and Safety Monitoring Board, stating that the drug was unlikely to show a clinical benefit over current treatments.

Given the influx of positive and negative news during the year, it should come as no surprise that the company's stock went on a roller-coaster ride.

Now what

Merrimack continues to offer investors reasons to be both optimistic and cautious. On the plus side, Onivyde sales continue to climb, and with Shire launching the drug in Europe, Merrimack is opening up a new revenue stream that should help to reduce its heavy losses. In addition, the company's pipeline continues to look intriguing, and if Onivyde can win a thumbs-up as a front-line treatment for metastatic pancreatic cancer, then sales could surge.

On the downside, Merrimack continues to carry a massive amount of debt, and its losses are not expected to end anytime soon. In total, management expects that it only has enough liquidity to fund its operations into 2018, which means a capital raise could soon be in the cards. If true, it could be highly dilutive to shareholders.

Given all of the above, I continue to believe that Merrimack is far too risky to warrant an investment. For that reason, I plan to continue to root for it from the sidelines.