+ Watch MACK
on My Watchlist
BUY@ 4.5 TP 10
recent insider buying
I'm running a little behind on my pitches on the more complicated stocks, so by the time I'm getting around to discussing Merrimack I'm already well in the hole on my theory. I liquidated my 3000 share position for a slight loss at around 3.7, and I was glad to get it after being down more than $5000 in the early part of November. Nevertheless, I mistook a sustained upward movement for a dead cat bounce and I'm now out of the stock with $3000 and counting in unrealized gains left on the table.The issue with Merrimack is the significance of missing the primary PFS endpoints in their phase II trials of MM-121 in ovarian and breast cancer this quarter. While the street initially decided to treat the stock as if the trials had failed, management now seems to have gained the upper hand with their angle that the trials were never expected to show PFS benefit in the general population but rather to identify favorable biomarkers for future trials. The change in market sentiment has caught me by surprise, considering that the explanation failed to support the stock in the aftermath of the ovarian cancer trial but seems to have been wildly successful after the breast cancer trial. Perhaps the deciding factor is the fact that the company claims that the favorable biomarkers identified in the breast cancer trial were the same ones identified in the ovarian cancer trial.I'm going to stick with my red thumb guns here for a number of reasons. The first is that the current move in the stock is based on a change of sentiment and faith, and those winds have already shifted once. There may be some scientific validity to Merrimack's claim of favorable biomarkers, but at the same time one has to wonder if with so many shots on goal the company was virtually assured of finding something on which to base a future trial. In the ovarian cancer trial the hazard ratio for the entire population was 1.0, indicating nil benefit of the MM-121 arm. The flip side of benefit seen in the favorable subset is a harmful effect of MM-121 in the rest of the population. Does this faze Merrimack? Not in the least. They have an explanation for everything. Traders may be buying into Merrimack's version for now, but I doubt it will take much to let the air out of this balloon. I'm also not impressed by the way they swept the phase II trial of MM-121 in NSCLC under the rug. This trial seems to have been an unequivocal failure but they don't plan to PR the data, using the dubious excuse that they did not collect enough high quality histology samples to draw reliable conclusions.Another concern I have about MM-121 is the side effects reported in the ovarian cancer trial. Significant increases in GI toxicity and pulmonary embolism over paclitaxel alone. Safety is the flipside of the efficacy issue and could sink MM-121 even if management's theory of subset efficacy proves correct.I believe the NAPOLI-1 phase III trial of MM-398 in refractory pancreatic cancer will be an unequivocal failure if results are actually reported in Q2 2014 as currently promised. Aside from the virtually universal failure of phase III trials in advanced or refractory pancreatic cancer that I have noted in my years following this sector, repeated delays in the projected release of topline data have also proved to be a negative prognostic sign. There's always a Seeking Alpha contingent that claims the slower than expected rate of deaths leading to trial prolongation is mathematical proof that the trial drug is working. They always turn out to be wrong. The slower than expected rate of deaths more likely means that the study population was not as sick as expected, meaning that they are all living longer and it is actually harder to show a stat sig benefit of the study drug.Finally, despite the juicy 182M in cash that Merrimack reported in their last 10Q, the company's burn ballooned to 40M last quarter and they have 111M in debt. That means a virtual certainty of more dilution before MM-121 can be moved in to phase III, and the last financing was managed poorly, to say the least.
GOOD PROSPECTS FROM TRIALS
3yr REV 43%
Good news soon hopefully
Business structure and financing plan
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