Analyst Conference Summary


Merrimack Pharmaceuticals

conference date: March 1, 2017 @ 5:30 AM Pacific Time
for quarter ending: December 31, 2016 (Q4, Fourth quarter 2016)

Forward-looking statements

Overview: selling Onivyde means a lot depends on the narrower, 3-candidate clinical pipeline going forward.

Basic data (GAAP):

Revenue was $61.2 million, up 118% sequentially from $28.1 million, and up 186% from $21.4 million in the year-earlier quarter.

Net income was negative $32.4 million, down sequentially from negative $30.1 million, but up from negative $47.8 million year-earlier.

EPS was negative $0.25, down sequentially from negative $0.23 and up from negative $0.41 year-earlier.


"Upon the closing of the asset sale, Merrimack will receive a $575.0 million upfront cash payment from Ipsen (subject to a working capital adjustment as provided in the asset purchase and sale agreement). Merrimack expects to use these proceeds to declare and pay a special cash dividend of at least $200.0 million to stockholders and use an additional $195.1 million to redeem its senior secured notes.  Additionally, if the asset sale is consummated and certain milestones are met with Shire, Merrimack expects to receive up to an aggregate of $33.0 million in net milestone payments in 2017. Merrimack believes that these potential cash inflows, along with the completion of the headcount reduction and refocused research and development efforts that were announced in January 2017, will provide financial resources sufficient to fund its operations into the second half of 2019."

[WPM: shares outstanding are about $130 million, so the special dividend, if paid, could be about $1.54 per share]

Conference Highlights:

Richard Peters, the new CEO, said "The transaction with Ipsen, once completed, will allow for the immediate return of cash to stockholders, while also providing Merrimack with an infusion of capital that we believe will fund our streamlined oncology pipeline into the second half of 2019. We are confident that our clinical stage assets have the potential to benefit cancer patients around the world and drive Merrimack's long-term success and stockholder value creation."

After a comprehensive pipeline review, Merrimack will focus its development efforts on MM-121, MM-141, and MM-310.

Merrimack will sell Onivyde and its generic version of doxorubicin hydrochloride liposome injection to Ipsen S.A. for up to $1.025 billion, plus a possible $33 million milestone payment, if stockholders approve the sale on March 30, 2017. See Guidance above for effects on 2017. The $1.025 billion figure would only be if Onivyde achieves specified label expansions.

Onivyde product revenue was $15.8 million, up 9% sequentially from $14.5 million.

License and collaboration revenue was $44.1 million, up sequentially from $12.4 million. The increase is from a $30 million milestone payment from Shire.

Other revenue was $1.4 million.

A Phase 2 clinical trial of Onivyde for front-line metastatic pancreatic cancer continued enrollment. This could address 46,000 patients annually in the U.S. A total of 5 cancer types will be targeted by Shire and Merrimack with Onivyde in the next round of trials. Results should be announced in 2018. Working with Shire to test Onivyde in second line non-small cell lung cancer, compared to the current standard of care, topotecan.

An Abbreviated New Drug Application (ANDA) was filed by Actavis LLC for generic doxorubicin hydrochloride liposome injection (Doxil®). This is the first product developed by Merrimack under a development, license and supply agreement with Actavis pursuant to which Merrimack is responsible for the development and commercial supply of bulk drug product. If the product is approved, Merrimack is eligible to receive a percentage share of net profits in the mid-twenties

HERMIONE Phase 2 trial for MM-302 for third line HER-2 positive breast cancer continued, in combination with herceptin

MM-121 (seribantumab) Phase 2 trial in non-small cell lung cancer who are heregulin positive continued. Will retool the trial into a proof of concept study with a readout in 2018. Will start a study in breast cancer this year.

An MM-141 Phase 2 clinical trial continued for frontline pancreatic cancer who have high serum IGF-1 levels, in combination with existing therapies. Blocks two upstream redundant pathways. Retooling into a proof of concept trial with results in 2018.

MM-310 is an antibody directed nanoliposome targetting the EphA2 receptor, which is present in many major tumor types. Delivers docetaxel as a prodrug. Will start it first Phase 1 trial this quarter with a dosing schedule result in 2018.

Merrimack plans to seek partners for the development of its therapies.

See also the Merrimack Pipeline.

Cash and equivalents ended at $21.5 million, down sequentially from $48.5 million. Lists $334 million in total liabilities. After the Ipsen transaction should have cash to fund development into 2019.

Costs and expenses were $87.5 million, consisting of: $3.3 million cost of goods sold, $55.0 million for R&D; and $24.2 million for selling, general and administrative expenses, and $5.0 million for restructuring. Operating profit was negative $26.3 million. Other expenses were $7.3 million. Loss attributed to non-controlling interest was $1.2 million.


MM-141 enrollment progress? We have retooled it into a smaller study with a topline readout in 2018.

MM-310 initiation? Start the trial in Q1 of this year.

Nearer term value inflection points? 2018 is the year for readouts. Earlier would be the completion of the Onivyde transaction and the start of the MM-121 breast cancer study.

Sanofi opted not to partner on MM-121? I was aware of Merrimack and its pipeline. "I voted with my feet."

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Disclaimer: My analyst call summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. Before making or terminating an investment you should always verify any factual basis of your decision.

Copyright 2017 William P. Meyers