Please ensure Javascript is enabled for purposes of website accessibility

Merrimack Pharmaceuticals Inc Rose 28% in March. Here's Why.

By Brian Feroldi - Apr 7, 2016 at 4:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares bounce back from a rough start to the year.

Image Source:  Merrimack Pharmaceuticals

What: Investors in Merrimack Pharmaceuticals (MACK 0.00%), a cancer-focused biopharmaceutical company, had a great month. Shares jumped by 28% during March, according to data from S&P Global Market Intelligence.

MACK Chart

So what: Pinpointing the exact reason for the stock's jump is tough, but there were a few noteworthy developments during the month that likely combined to cause the upward trend:

  • A SEC filing showed that one of the company's directors purchased $192,500 worth of the stock in late February for $5.50 per share, which was the first time an insider has made an open-market purchase in seven months time. The purchase looks like it was well timed as it came just a few days after Merrimack's stock dropped to near a two-year low. 
  • The National Comprehensive Cancer Network, or NCCN, has added Merrimack's pancreatic cancer drug Onivyde in its 2016 clinical practice guidelines for treating patients with pancreatic adenocarcinoma. The guidelines call for Onivyde to be used in combination with fluorouracil and leucovorin as a category one second-line therapy in patients who have previously been treated with gemcitabine-based therapy. Being included on the list could go a long way toward building awareness and support for the use of the drug.  

Add those developments to the fact short interest in Merrimack's stock has been on the rise recently -- more than 28 million shares are currently sold short, up from 20 million at year end -- and it's possible that the news caused a few traders to cover their short, sending the company's shares higher.

Now what: The year ahead looks like it should be an exciting one for Merrimack's investors. The company and its partner Baxalta are getting ready to launch Onivyde in Europe if the drug gets the go ahead from regulators, which could prove to be a revenue bonanza for Merrimack. The partnership could allow Merrimack to earn up to $970 million in milestone payments plus royalties if all the conditions of the agreement are met, which is a huge number for a company with a market cap of roughly the same number.  

The company believes that Onivyde has an addressable market of roughly $800 million in the U.S. If the company is able to execute on its commercialization plan, then Merrimack could swing from a money-loser into a profitable enterprise in a few short years time, which would likely make Merrimack's current share price look inexpensive in retrospect.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Merrimack Pharmaceuticals, Inc. Stock Quote
Merrimack Pharmaceuticals, Inc.
MACK
$5.25 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.