Stock Update (NASDAQ:MACK): Merrimack Pharmaceuticals Inc Reports Second Quarter 2016 Financial Results


Merrimack Pharmaceuticals Inc (NASDAQ:MACK) announced its second quarter 2016 financial results.

ONIVYDE® (irinotecan liposome injection) Update

ONIVYDE updates include:

  • Receipt of positive opinion from the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency for ONIVYDE in combination with fluorouracil (5-FU) and leucovorin for the treatment of patients with metastatic adenocarcinoma of the pancreas who have progressed following treatment with gemcitabine-based therapy. The CHMP’s positive opinion for ONIVYDE will now be reviewed by the European Commission for marketing authorization;
  • Presentation of new analyses of the Phase 3 NAPOLI-1 data showing patients treated with the ONIVYDE regimen maintained similar baseline quality of life at 12 weeks despite the addition of a second chemotherapeutic agent when compared to 5-FU and leucovorin alone at the European Society for Medical Oncology (ESMO) 18th World Congress on Gastrointestinal Cancer; and
  • Recognition of $14.8 million of gross product revenues and $12.9 million of net product revenues from U.S. commercial sales of ONIVYDE for the second quarter of 2016. This is compared to $10.0 million of net product revenues for the first quarter of 2016, which represents an increase of $2.9 million, or 29%, in net product revenues over the prior quarter.

Key Recent Events

Merrimack’s key recent events include:

  • Receipt of Fast Track designation from the U.S. Food and Drug Administration (FDA) for seribantumab (also known as MM-121) for development in patients with heregulin-positive, locally advanced or metastatic non-small cell lung cancer whose disease has progressed following immunotherapy;
  • Presentation of an expanded overall survival analysis from the seribantumab Phase 2 breast cancer study indicating that seribantumab decreased risk of death by more than 50% in HER2-negative, hormone receptor positive breast cancer patients at the American Association for Cancer Research (AACR) Precision Medicine Series;
  • Initiation of a Phase 1 clinical study of MM-151 in combination with ONIVYDE plus 5-FU and leucovorin in patients with RAS wild-type metastatic colorectal cancer;
  • Initiation of a leading-edge biomarker-selected, multi-arm Phase 1 clinical study in metastatic colorectal, non-small cell lung, and head and neck cancers to evaluate the safety and tolerability of MM-151 in combination with seribantumab in patients with heregulin positive tumors, MM-151 in combination with MM-141 in patients with IGF-1-positive tumors, and MM-151 in combination with a MEK inhibitor (trametinib) in patients with KRAS/NRAS-mutant tumors;
  • Presentation of clinical data on multiple therapeutic candidates from Merrimack’s antibody engineering and antibody-directed nanotherapeutic (ADN) technology platforms at the 2016 American Society of Clinical Oncology (ASCO) Annual Meeting, including the final analysis from the Phase 1 clinical study of MM-151 showing clinical activity in multiple solid tumor types, including colorectal cancer; and
  • Presentation of Merrimack’s research and development strategy at its 2016 Investor Day, including updates on ONIVYDE and MM-151 development, Merrimack’s ADN platform and Merrimack’s systems immuno-oncology program.

Upcoming Milestones

Merrimack anticipates the following upcoming clinical milestones:

  • Results in 2017 from the Phase 2 clinical study of ONIVYDE in previously untreated front-line metastatic pancreatic cancer;
  • Results in 2017 from HERMIONE, the Phase 2 clinical study of MM-302 in patients with HER2-positive metastatic breast cancer that is designed to support a potential Accelerated Approval application to the FDA;
  • Results in 2018 from the Phase 2 clinical study of MM-121 in patients with heregulin-positive, locally advanced or metastatic non-small cell lung cancer that is designed to support a potential Biologics License Application to the FDA; and
  • Results in 2018 from the Phase 2 clinical study of MM-141 in patients with front-line metastatic pancreatic cancer who have high serum levels of free IGF-1.

Second Quarter 2016 Financial Results

The following summarizes Merrimack’s financial results from the quarter ended June 30, 2016:

  • Product revenues from the commercial sale of ONIVYDE, net of discounts, allowances and reserves, were $12.9 million for the second quarter of 2016, compared to $10.0 million for the first quarter of 2016. This represents an increase of $2.9 million, or 29%, over the prior quarter;
  • License and collaboration revenues were $19.3 million for the second quarter of 2016, compared to $11.3 million for the first quarter of 2016. This represents an increase of $8.0 million from the prior quarter. This revenue includes $10.0 million related to a substantive milestone achieved during the second quarter of 2016 as well as revenue that was recognized under the proportional performance revenue recognition model;
  • Operating expenses were $61.7 million for the second quarter of 2016 and are made up of the following:
    • $41.0 million of research and development expenses, including a one-time $10.0 million milestone payment made to PharmaEngine, as compared to $32.9 million of research and development expenses incurred during the first quarter of 2016; and
    • $20.7 million of selling, general and administrative expenses as compared to $17.8 million of selling, general and administrative expenses incurred during the first quarter of 2016;
  • Interest expense was $21.1 million for the second quarter of 2016, compared to $8.6 million for the first quarter of 2016. This $12.5 million increase was primarily due to a $14.6 million one-time, non-cash loss related to the induced conversion of an aggregate principal amount of $64.2 million of Merrimack’s convertible notes in April 2016; and
  • Net loss attributable to Merrimack for the second quarter of 2016 was $50.8 million, or $0.40 per share, compared to a net loss attributable to Merrimack of $38.5 million, or $0.33 per share, for the first quarter of 2016.

Financial Outlook

In an effort to provide reconciliations to GAAP financial measures, Merrimack clarifies:

  • Previous guidance on the achievement of $46.5 million of net milestones in 2016 related to ONIVYDE is comprised of the anticipated achievement of $85.0 million of milestone obligations from Shire and $38.5 million of offsetting milestone obligations to PharmaEngine. Of the anticipated $85.0 million of milestone obligations from Shire, $75.0 million are expected to be classified as substantive milestones that would increase license and collaboration revenues and the remaining $10.0 million are expected to be classified as non-substantive milestones that would be recognized through Merrimack’s proportional performance revenue recognition model; and
  • Previous guidance for aggregate research and development and selling, general and administrative expenses for 2016, when calculated in accordance with GAAP, was in the range of $263.5 million to $283.5 million, which included the anticipated achievement of $38.5 millionof milestone obligations to PharmaEngine. This corresponds to Merrimack’s previously disclosed guidance that aggregate research and development and selling, general and administrative expenses, excluding anticipated milestone obligations to PharmaEngine, a non-GAAP financial measure, would be in the range of $225.0 million to $245.0 million for 2016.

With respect to its fiscal 2016 guidance, Merrimack:

  • Lowers its previously provided expense guidance range by $20.0 million, such that Merrimack now anticipates aggregate research and development and selling, general and administrative expenses for 2016, when calculated in accordance with GAAP, to be in the range of$243.5 million to $263.5 million. Excluding anticipated milestone obligations to PharmaEngine of $38.5 million, this corresponds to a range of $205.0 million to $225.0 million for 2016, which is a non-GAAP financial measure.

A table reconciling guidance for aggregate research and development and selling, general and administrative expenses, excluding anticipated milestone obligations to PharmaEngine, a non-GAAP financial measure, to aggregate research and development and selling, general and administrative expenses calculated in accordance with GAAP is included at the end of this press release. (Original Source)

Shares of Merrimack are down nearly 5% to $5.65 in after-hours trading. MACK has a 1-year high of $11.18 and a 1-year low of $5.02. The stock’s 50-day moving average is $5.68 and its 200-day moving average is $6.58.

On the ratings front, Merrimack has been the subject of a number of recent research reports. In a report issued on May 26, Robert W. Baird analyst Michael Ulz initiated coverage with a Hold rating on MACK and a price target of $8, which implies an upside of 35.1% from current levels. Separately, on May 20, Brean Murray Carret’s Jonathan Aschoff reiterated a Buy rating on the stock and has a price target of $16.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Michael Ulz and Jonathan Aschoff have a total average return of -10.5% and -10.6% respectively. Ulz has a success rate of 36% and is ranked #3522 out of 4085 analysts, while Aschoff has a success rate of 38% and is ranked #3981.

Merrimack Pharmaceuticals, Inc. engages in discovering, developing and preparing to commercialize innovative medicines consisting of novel therapeutics paired with diagnostics for the treatment of cancer. Its offers its first commercial product, Onivyde, which is a novel encapsulation of the marketed chemotherapy drug irinotecan in liposomal formulation.