What: Shares of Merrimack Pharmaceuticals (MACK 0.07%), a small-cap biotech with a focus on creating products that treat cancer, were down more than 10% in early trading today after the company reported its third quarter earnings results.

So what: Merrimack's revenue during the quarter was $16.4 million, which was down 41% from last year due to the termination of its previous agreement with Sanofi, however its collaboration deal with Baxalta (NYSE: BXLT) help to partially offset the decline. Despite the decline, results actually beat analysts' expectations of $12.7 million in revenue.

Merrimack's spending continued to ramp up as it prepared for the launch of Onivyde, its first drug that was cleared by the FDA for sale on October 22nd. The ramp up caused the company to report a net loss of $42.4 million, or $0.38 per share, though this figure was actually a bit better than the $0.41 loss that the Street was expecting. 

Looking at the company's cash position, Merrimack currently boasts $62.4 million on its books, and the company expects to receive $47.5 million in milestone payments from Baxalta in the fourth quarter. When combined with its cost sharing reimbursements from the Onivyde launch, the company believes it can fund its operation into the second quarter of 2016. However, that runway may be able to extended a bit further when considering potential sales of Onivyde, the potential for another $46.5 million in net milestone payments from Baxalta, and access to an additional $15 million available via an existing loan agreement. 

Now what: While the report look decent overall, I think investors are not fully comfortable with the Merrimack's financial position and are worried about being hit with a capital raise soon, which could be why shares are tanking today. While we can't know for sure, it's possible that management is waiting to see if its share price heads higher before announcing a secondary offering, as it does have the upcoming catalyst of a potential European approval that could get shares moving in the right direction.

Image Source: Merrimack Pharmaceuticals

Regardless of today's market movement, the future of this company now rests firmly on the potential success of Onivyde. While many patients today are currently using gemcitabine as a first or second-line therapy, an estimated 19,000 of the 49,000 patients that are diagnosed each year still progress further with the disease -- and this is the opportunity Onivyde is staring down. That leads Merrimack's management team to believe that the drug's addressable market opportunity is roughly $800 million in the U.S. alone, and that number could certainly head higher over time if Onivyde is able to gain approval overseas and expand its clinical indications. 

While it's never fun to watch your stock take a short-term hit, if you were bullish on Merrimack before today's price movement, I see little reason to change your view.