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Merrimack (MACK) Up 6.7% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
HCP's third-quarter performance indicates year-over-year growth in three-month cash SPP net operating income (NOI) for the company's total portfolio.

A month has gone by since the last earnings report for Merrimack Pharmaceuticals (MACK). Shares have added about 6.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Merrimack due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Merrimack Suffers Wider-Than-Expected Loss in Q2

Merrimack incurred a loss of $1.33 per share for the second quarter of 2018, wider than the Zacks Consensus Estimate of a loss of $1.28 but narrower than the year-ago quarter’s loss of $2.18.

We remind investors that Merrimack sold its only marketed product, Onivyde, last year to Ipsen. The company could not generate any revenues in the reported quarter in absence of a marketed product in its portfolio.

In the quarter under review, research and development expenses decreased 30.8% year over year to $13.7 million owing to Merrimack's refocused clinical and preclinical pipeline.

General and administrative expenses were down 76.4% year over year to $3.5 million on the back of reduced headcount levels following the sale of Onivyde to Ipsen.

Outlook

The company had cash, cash equivalents and marketable securities of $60 million as of June 30, 2018. It received an additional $18-million milestone payment from Shire on the sale of Onivyde in two major European countries. Merrimack is eligible to receive an aggregate of $450 million as milestone payments from Ipsen, subject to stockholder’s approval.

Merrimack also remains eligible to receive $5 million in relation to the sale of Onivyde in the first major non-European, non-Asian country and another $10 million for the first patient dosed for an indication other than pancreatic cancer.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 96.82% due to these changes.

VGM Scores

Currently, Merrimack has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Merrimack has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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