Cowen Top Analyst Weighs In On Merrimack Pharmaceuticals Inc (MACK) Following Cancer Drugs Deal with Ipsen


In a research report released today, Cowen analyst Eric Schmidt reiterated a Market Perform rating on shares of Merrimack Pharmaceuticals Inc (NASDAQ:MACK), after the company agreed to sell some of its oncology assets, including the pancreatic cancer drug Onivyde and generic Doxil, to Ipsen SA in a deal worth up to $1.025 billion. In addition, Merrimack will lay off 80% of its workforce, and will be left with 80 employees after the sale closes in the first quarter of 2017.

Schmidt commented, “We view the Ipsen transaction and associated restructuring as a necessary and favorable solution to Merrimack’s problematic financial situation ($49MM in cash at end of September, ~$20MM quarterly burn rate, $175MM in debt). We estimate Onvyde might have $100-200MM in peak U.S. potential, and therefore view the sale price of $575MM (~3-5X peak sales) as reasonable for a modestsized oncology asset. We expect MACK shares to get a lift today as the company’s precarious financial situation looks to have been remedied. Furthermore, it appears that the company’s new management is serious about reducing costs, focusing on higher return programs, and returning excess cash to shareholder, all things that we commend and view as a major shift in strategy.”

“On the other hand, we don’t have conviction in any of the three assets Merrimack has prioritized for future development. Of the three, only MM-121 is supported by meaningful clinical data, and its developmental history is quite mixed. Merrimack will need to spend time and effort to convince investors that these pipeline assets are promising. With meaningful data still at least 12 months away, we see no reason to become more encouraged about MACK shares at this time,” the analyst continued.

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Eric Schmidt has a yearly average return of 20.2% and a 59% success rate. Schmidt has a 19.8% average return when recommending MACK, and is ranked #74 out of 4350 analysts.

Out of the 5 analysts polled by TipRanks, 4 rate Merrimack Pharmaceuticals stock a Hold, while 1 rates the stock a Buy. With a return potential of 145%, the stock’s consensus target price stands at $9.