Merrimack Pharmaceuticals, Inc. (NASDAQ:MACK) is a biopharmaceutical company based in Cambridge, Massachusetts that is entitled to receive up to $225.0 million in contingent milestone payments related to its sale of ONIVYDE® and MM-436 to Ipsen S.A. in April 2017. The company does not have any ongoing research or development activities and has no employees, instead relying on external consultants to run its day-to-day operations.

Financials

In the company's latest financial results for the three months ended March 31, 2024, Merrimack reported a net loss from continuing operations of $0.4 million, compared to a net loss of $0.3 million in the same period of the prior year. The company's general and administrative expenses were $0.7 million in the first quarter of 2024, up slightly from $0.6 million in the first quarter of 2023.

For the full year 2023, Merrimack reported an annual net loss of $1.18 million, with no revenue generated. The company's annual operating cash flow and free cash flow were both -$1.52 million.

Liquidity

On the positive side, Merrimack's cash and cash equivalents and short-term investments totaled $244.1 million as of March 31, 2024, providing the company with a strong liquidity position to fund its operations for the foreseeable future. This cash balance was bolstered by a $225 million milestone payment the company received in March 2024 following the FDA's approval of ONIVYDE® for the first-line treatment of metastatic pancreatic ductal adenocarcinoma.

Risks and Challenges

However, the company's future is uncertain. On May 10, 2024, Merrimack's stockholders approved a Plan of Dissolution whereby the company will cease operations and dissolve in accordance with Delaware law. Stockholders of record on May 10, 2024 will receive a one-time liquidating dividend of $15.10 per share, which is expected to be paid on or around May 17.

Business Overview

Merrimack's journey has been marked by both successes and challenges. The company's sale of its commercial business, including ONIVYDE®, to Ipsen in 2017 for up to $225 million in potential milestone payments was a significant event. However, the company's subsequent efforts to monetize its remaining assets have been mixed.

In July 2019, Merrimack completed the sale of its anti-HER3 antibody programs, MM-121 (seribantumab) and MM-111, to Elevation Oncology, Inc. (formerly known as 14ner Oncology, Inc.). The company received an upfront cash payment of $3.5 million and is eligible to receive up to $54.5 million in additional potential development, regulatory approval, and commercial-based milestone payments. However, in January 2023, Elevation announced that it had paused further investment in the clinical development of seribantumab and intends to pursue further development only in collaboration with a partner.

In addition to the $225 million milestone payment received in March 2024, Merrimack is entitled to up to $225 million in additional contingent milestone payments from Ipsen. These potential payments are tied to the approval of ONIVYDE® for the treatment of small-cell lung cancer after failure of first-line chemotherapy ($150 million) and for an additional indication unrelated to those described above ($75 million). However, the company believes the probability of receiving these additional milestones is remote based on publicly available information provided by Ipsen.

Merrimack's financial ratios paint a mixed picture. The company's current ratio of 10.78 and quick ratio of 10.77 as of March 31, 2024 indicate a strong liquidity position, with the company's cash and cash equivalents and short-term investments covering a significant portion of its current liabilities. However, the company's profitability ratios, such as net profit margin and return on assets, are negative due to its ongoing losses from operations.

Outlook

Looking ahead, Merrimack's future is largely dependent on its ability to capture the potential milestone payments from Ipsen and Elevation Oncology. However, as the company has announced its plans to dissolve, it is unclear whether any additional milestone payments will be received or how they will be distributed to shareholders.

Conclusion

In conclusion, Merrimack Pharmaceuticals is a unique case in the biopharmaceutical industry. The company has successfully monetized some of its assets, but its long-term future remains uncertain as it prepares to cease operations and dissolve. Investors should closely monitor any developments regarding the potential milestone payments, as well as the company's plans for the distribution of its remaining assets to shareholders.