Merrimack (MACK) Q3 Loss Lower Than Expected, Stock Up

Merrimack Pharmaceuticals, Inc. (NASDAQ:MACK) reported a loss of 23 cents per share in the third quarter of 2016, narrower than the Zacks Consensus Estimate of 30 cents.

Quarterly revenues came in at $28.1 million, down 16.7% sequentially. Revenues were, however, above the Zacks Consensus Estimate of $27.4 million.

Merrimack’s shares gained 9% following the release of its third-quarter results.

Quarter in Detail

Merrimack’s top line comprises revenues generated by its only marketed product, Onivyde, and license and collaboration fees.

Onivyde sales in the reported quarter amounted to $14.5 million, up 12.4% sequentially, primarily driven by an increase in the number of new patients on therapy, as well as longer treatment duration. Shipment of the drug from specialty distributors to individual accounts and facilities grew 18% sequentially.

Note that in Oct 2015, Onivyde was approved in the U.S., in combination with fluorouracil (5-FU) and leucovorin, for the treatment of patients suffering from metastatic adenocarcinoma of the pancreas, who were previously treated with Eli Lilly and Company’s (NYSE:LLY) Gemzar-based therapy. This October, Onivyde gained approval in the EU for the same indication.

License and collaboration revenues came in at $12.4 million, down 35.8% sequentially.

Research and development expenses were $32.1 million, down 21.8%. Likewise, general and administrative expenses were also declined 12.6% to $18.1 million.

Outlook

Merrimack has lowered its expense guidance for 2016. The company now expects research and development and selling, general and administrative expenses in the range of $235.5–$245.5 million in 2016, compared with its earlier projection of $243.5–$263.5 million.

Meanwhile, adjusted research and development and selling, general and administrative expenses (excluding anticipated milestone obligations to PharmaEngine of $35.5 million) are expected in the range of $200–$210 million.

Merrimack has also revised its guidance for milestone achievements related to Onivyde. The company anticipates milestone payment of $4.5 million in 2016, compared to $46.5 million projected earlier. The remaining net milestones of $42 million are expected in the first half of 2017.

Pipeline Update

In Oct 2016, an abbreviated New Drug Application (ANDA) for a generic version of Doxil (doxorubicin HCl liposome injection) was accepted for review by the FDA. Merrimack has an agreement with Teva Pharmaceutical Industries Limited (NYSE:TEVA) , under which Merrimack is responsible for the development and commercial supply of the bulk form of Doxil.

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Meanwhile, Merrimack is working on expanding Onivyde’s label into other indications such as front-line pancreatic cancer, pediatric solid tumors and glioma.

Our Take

Merrimack’s third-quarter results were encouraging with the company reporting a narrower-than-expected loss and revenues surpassing expectations. Initial uptake of Onivyde has been encouraging and should boost the top line, going forward. We are also positive on the company’s efforts to develop its pipeline candidates.