Merrimack Pharmaceuticals, Inc. (MACK)

[Mitshu35]

Reddit ARTICLE:

MACK is the head company for one very interesting drug. Onivyde was approved back in October 22nd 2015. The drug is a combination of the chemotherapy drug irinotecan, fluorouracil and lucovorin. The drug is specifically for the treatment of patients who have 'metastatic adenocarcinoma' of the pancreas (a form of cancer).

The drug itself is complicated, but it has been approved, and is showing positive signs of not only results, but sales. I will not go into too much detail regarding the drug, approval process or anything like that, as I am simply looking at the business side. If you need more information, visit their patient site https://www.onivyde.com/for-patients/. It has A LOT of information regarding the drug. I have read through it a couple of times, and I am very impressed with the way in which they handled the approval process, FDA testing and now administration of the drug.

In the fourth quarter of 2015 alone, it boasted over $4 million in sales, which covered just the final two months (due to be being released in late October). Considering the rate at which a new drug sometimes takes to be administered, this seems to me like an exceptionally fast growth for the drug. It should also be noted that in March 2016, the drug had already reached 75% of targeted national and regional payers.

During the end of last year, and leading into 2016, stock suffered, as did much of the market. However, when the Q4 earnings results arrived, the stock shot up from around $5.50 to $8+. This was not the same for first quarter 2016 results. According to their Q1 financial results, there was 133% growth in the market (speaking specifically about ONIVYDE). The market had no reaction to this news, which was interesting, as the market reacted very well to the first month of sales.

These numbers are outstanding for a new drug, as they show real interest in prescribing to the market. Assuming ONIVYDE is able to achieve approval for frontline metastatic cancer (currently in phase 2 of trials), it would take the patient base from just under 20,000 and increase it to 70,000. This would potentially create a $1-$1.5 billion market. This alone gives us the price point we have regarding $MACK, as an annual turnover like this should make the company much more valuable than the low $700-750 million market cap it has now. Similar ideas have been shared on Seeking Alpha, so please check there too!

Future Drugs

However, this is not the final story. Along with ONVIYDE, $MACK has two other major assets in MM-302 and MM-121.

MM-121 began its phase II study in February 2015, still in the midsts of this trial right now. This drug is aiming to meet the need for non-small cell lung cancer, something which has a very high unmet need in the market. The potential size of this field is huge, seeing worldwide peak sales reaching a maximum of $2 billion. Again, another huge drug. I wouldn't expect anything lower than $1.3-1.6 billion for this drug.

MM-302 is another drug currently in the FDA approval process. Focused on metastatic breast cancer, boasting 9,000-10,000 potential patents in the US (maybe a slight over estimate, but by no more than 1,000). Even this drug could be looking at 400-500 million a year, adding further to the companies potential value.

Stock Pricing

Assuming that no other drugs are approved, and it takes ONIVYDE between 6-7 years to reach max potential. I don't see why the company shouldn't be placed in the $1.3 billion range for a buyout. I understand this isn't the same Bio market that existed a few years ago, but the company is boasting fantastic sales numbers, and is continuing to grow.

As I said, ONIVYDE is not the only aspect of this company, MM-302 and MM-121 seem to be both very promising attributes for $MACK. I understand that the approval rate it low, however, if approved and there has been no buyout before this approval, I could see the stock price skyrocketing. However, I do not believe $MACK will survive too much longer past the entrance into the phase 3 of the FDA study. The company looks too appealing.

If we value the markets of these two drugs with a 25% chance of approval, and priced accordingly, I don't see why we shouldn't be staring at a $2.2-5 billion buyout ($18 stock price).

Future

My assumptions could be wildly off, however I know for sure that there is only really one direction for the company to go in the long run, and that is up. ONIVYDE alone is proving to be both a fantastically efficient drug, and Merrimack is doing a great job selling it.

I am into $MACK for just over 5,000 shares.

I also picked up 150 August 19th $6 Calls. 2nd quarter earnings report should be on the 4th of August, so hopefully I will be able to execute that call, and pick up a high return on the cheap (I am basing this call purchase on the reaction after the Q4 earnings report from last year, the Bio market seems ripe and ready to invest, so I see a lot of buying from even the smallest bit of excitement).