With only about a year''s worth of cash Merrimack will need more capital soon. Are they planning a secondary offering ahead of the results from the phase 3 trial of MM-398? if they raise cash now, the dilution will likely result in share price compression. If they wait until after the phase III results, then either a) they can raise more cash without significant diluteion if the results support approval OR b) if the results do not support approval, then severe dilution and share compression presents itself as a real possibility.
What do folks here think is the most likely scenario of these or are there other possibilities to fund operations into 2014? Non-dilutive financing seems unlikely without an approved product.
Answer: In early 3rd Quarter they will raise capital. Stock was about $6 at that time and corrected to $4 and change. I suspect we will see these levels again before too long (perhaps even tomorrow). Shareholders should have taken a look at the books asnd I did and they would have seen the Mack needed cash.
I agree and in my back of the envelope calculation here there just doesn't seem to be enough cash on hand to get into next year. They do have $40 million credit line, but that would be taking on more debt and still doesn't add enough of a buffer in worst case scenario. Plan seems to be a) wait to get great data from MM-398, then do ~10 million share secondary at elevated share price ($12?) to bring in $100 million dollars to fund rollout of MM-398 and move pipeline forward until revenue starts to flow. Wonderful, but this is blue sky thinking which even if you give it 80/20 probability of success, then leaves 20% chance of catastrophic financial problems. (i.e. try raising capital) after lead drug fails and share price is $2. or B) much more likely (and perhaps the only sensible thing to do) would be to do a spring 10 million share secondary at $5/share (discounting the results of MM-398 to new institutional investors) and put $50 million in the bank that can fund operations through 2014 (including the line of credit) even if the MM-398 study fails to deliver necessary robust data to support approval. This way they are effectively covered for worst case and can do another 10 million share secondary at higher price in early 2014 if MM-398 results are good to go. I would take a flyer on MACK at a secondary offering price, but current cash issues make me nervous at $6+ ahead of the MM-398 phase III data results later this year. Seems a bit too much like gambling and not investing. Am I missing something?