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Why Merrimack Pharmaceuticals Stock Is Tanking Today

By George Budwell – May 31, 2017 at 4:58AM

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The biotech's managerial shake-up is wreaking havoc on its share price.

What happened

Shares of Merrimack Pharmaceuticals (MACK -0.86%) have lost as much as 17.3% in early Wednesday trading on abnormally high volume. The stock's downtrend is the the result of the company's managerial shake-up that was announced late last week. Specifically, Dr. Yasir Al-Wakeel said he will resign as Merrimack's chief financial officer and head of corporate development effective June 9, 2017. As of 10:46 a.m. EDT, the stock was down 15.6%.

A man looks despairingly at a falling stock chart

Image source: Getty Images.

So what

Merrimack's shares have basically been in free fall ever since management decided to sell pancreatic-cancer drug Onivyde and the generic version of the anti-cancer medicine Doxil to the French drugmaker Ipsen SA in January. In a nutshell, Merrimack has reverted back to being a high-risk clinical-stage biotech since this deal, and the unexpected departure of its CFO adds yet another layer of uncertainty regarding the company's ability to create value for shareholders moving forward. 

Now what

Merrimack's future now squarely depends on the fate of its trio of anti-cancer clinical candidates: MM-121, MM-141, and MM-310. The glaring problem is that experimental cancer drugs in general have an absurdly poor track record, with over 95% of these drugs failing to ever reach the market. In fact, prospective cancer drugs are the least likely to get a green light from the FDA.  

So Merrimack's decision to regroup, and its subsequent failure to retain key executives in the process, isn't being welcomed with open arms by the market, and arguably for good reason. It might be best to watch this speculative biotech from the safety of the sidelines for the time being.

George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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