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What: Shares of Merrimack Pharmaceuticals (NASDAQ:MACK), a company developing cancer therapies and companion diagnostics, dipped by nearly 16% last month, according to S&P Capital IQ. On the bright side, this double-digit drop doesn't appear to be linked a specific negative event. Rather, the drugmaker's shares seemed to simply followed the entire healthcare sector lower for the month.


So what: Merrimack's experimental pancreatic cancer treatment, MM-398, is closing in on its target review date of Oct. 24 with the FDA. Given that a late-stage trial showed that MM-398 improved median overall survival, when used in conjunction with with 5-fluorouracil and leucovorin, compared to a control arm for a form a cancer with few available treatment options, I think MM-398 stands a pretty good chance of approval later this month. So, it's somewhat surprising that the market soured on this emerging cancer specialist last month, but it was probably related to the stock's heavy short interest of late. 

Now what: Assuming approval, the company plans on launching the drug as soon as possible. And that's perhaps where the biggest downside risk for investors lay at this point. While some peak sales estimates for MM-398 stand at around $700 million, there is a lot of debate surrounding this figure.

Because no standard of care currently exists for second-line metastatic pancreatic cancer, there simply isn't an approved drug that can act as a reliable guide for MM-398's commercial opportunity for this indication. So I'm content to let MM-398's regulatory process proceed to its conclusion, and its potential commercial launch take shape, before buying shares in this mid-cap biopharma.