On August 4, 2016 Merrimack Pharmaceuticals, Inc. (Nasdaq: MACK) reported its second quarter 2016 financial results (Press release, Merrimack, AUG 4, 2016, View Source [SID:1234514281]).

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Merrimack will host a live conference call and webcast today, Thursday, August 4 at 4:30 p.m., Eastern time, to provide an update on Merrimack’s progress as well as a summary of these results.

Investors and the general public are invited to listen to the call by dialing (877) 564-1301 (domestic) or (224) 357-2394 (international) five minutes prior to the start of the call and providing the passcode 38883620. A listen-only webcast of the call can be accessed in the Investors section of Merrimack’s website, investors.merrimack.com, and a replay of the call will be archived there for six weeks following the call.

ONIVYDE (irinotecan liposome injection) Update

ONIVYDE updates include:

Receipt of positive opinion from the Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency for ONIVYDE in combination with fluorouracil (5-FU) and leucovorin for the treatment of patients with metastatic adenocarcinoma of the pancreas who have progressed following treatment with gemcitabine-based therapy. The CHMP’s positive opinion for ONIVYDE will now be reviewed by the European Commission for marketing authorization;
Presentation of new analyses of the Phase 3 NAPOLI-1 data showing patients treated with the ONIVYDE regimen maintained similar baseline quality of life at 12 weeks despite the addition of a second chemotherapeutic agent when compared to 5-FU and leucovorin alone at the European Society for Medical Oncology (ESMO) (Free ESMO Whitepaper) 18th World Congress on Gastrointestinal Cancer; and
Recognition of $14.8 million of gross product revenues and $12.9 million of net product revenues from U.S. commercial sales of ONIVYDE for the second quarter of 2016. This is compared to $10.0 million of net product revenues for the first quarter of 2016, which represents an increase of $2.9 million, or 29%, in net product revenues over the prior quarter.
Key Recent Events

Merrimack’s key recent events include:

Receipt of Fast Track designation from the U.S. Food and Drug Administration (FDA) for seribantumab (also known as MM-121) for development in patients with heregulin-positive, locally advanced or metastatic non-small cell lung cancer whose disease has progressed following immunotherapy;
Presentation of an expanded overall survival analysis from the seribantumab Phase 2 breast cancer study indicating that seribantumab decreased risk of death by more than 50% in HER2-negative, hormone receptor positive breast cancer patients at the American Association for Cancer Research (AACR) (Free AACR Whitepaper) Precision Medicine Series;
Initiation of a Phase 1 clinical study of MM-151 in combination with ONIVYDE plus 5-FU and leucovorin in patients with RAS wild-type metastatic colorectal cancer;
Initiation of a leading-edge biomarker-selected, multi-arm Phase 1 clinical study in metastatic colorectal, non-small cell lung, and head and neck cancers to evaluate the safety and tolerability of MM-151 in combination with seribantumab in patients with heregulin positive tumors, MM-151 in combination with MM-141 in patients with IGF-1-positive tumors, and MM-151 in combination with a MEK inhibitor (trametinib) in patients with KRAS/NRAS-mutant tumors;
Presentation of clinical data on multiple therapeutic candidates from Merrimack’s antibody engineering and antibody-directed nanotherapeutic (ADN) technology platforms at the 2016 American Society of Clinical Oncology (ASCO) (Free ASCO Whitepaper) Annual Meeting, including the final analysis from the Phase 1 clinical study of MM-151 showing clinical activity in multiple solid tumor types, including colorectal cancer; and
Presentation of Merrimack’s research and development strategy at its 2016 Investor Day, including updates on ONIVYDE and MM-151 development, Merrimack’s ADN platform and Merrimack’s systems immuno-oncology program.
Upcoming Milestones

Merrimack anticipates the following upcoming clinical milestones:

Results in 2017 from the Phase 2 clinical study of ONIVYDE in previously untreated front-line metastatic pancreatic cancer;
Results in 2017 from HERMIONE, the Phase 2 clinical study of MM-302 in patients with HER2-positive metastatic breast cancer that is designed to support a potential Accelerated Approval application to the FDA;
Results in 2018 from the Phase 2 clinical study of MM-121 in patients with heregulin-positive, locally advanced or metastatic non-small cell lung cancer that is designed to support a potential Biologics License Application to the FDA; and
Results in 2018 from the Phase 2 clinical study of MM-141 in patients with front-line metastatic pancreatic cancer who have high serum levels of free IGF-1.
Second Quarter 2016 Financial Results

The following summarizes Merrimack’s financial results from the quarter ended June 30, 2016:

Product revenues from the commercial sale of ONIVYDE, net of discounts, allowances and reserves, were $12.9 million for the second quarter of 2016, compared to $10.0 million for the first quarter of 2016. This represents an increase of $2.9 million, or 29%, over the prior quarter;
License and collaboration revenues were $19.3 million for the second quarter of 2016, compared to $11.3 million for the first quarter of 2016. This represents an increase of $8.0 million from the prior quarter. This revenue includes $10.0 million related to a substantive milestone achieved during the second quarter of 2016 as well as revenue that was recognized under the proportional performance revenue recognition model;
Operating expenses were $61.7 million for the second quarter of 2016 and are made up of the following:
$41.0 million of research and development expenses, including a one-time $10.0 million milestone payment made to PharmaEngine, as compared to $32.9 million of research and development expenses incurred during the first quarter of 2016; and
$20.7 million of selling, general and administrative expenses as compared to $17.8 million of selling, general and administrative expenses incurred during the first quarter of 2016;
Interest expense was $21.1 million for the second quarter of 2016, compared to $8.6 million for the first quarter of 2016. This $12.5 million increase was primarily due to a $14.6 million one-time, non-cash loss related to the induced conversion of an aggregate principal amount of $64.2 million of Merrimack’s convertible notes in April 2016; and
Net loss attributable to Merrimack for the second quarter of 2016 was $50.8 million, or $0.40 per share, compared to a net loss attributable to Merrimack of $38.5 million, or $0.33 per share, for the first quarter of 2016.
Financial Outlook

In an effort to provide reconciliations to GAAP financial measures, Merrimack clarifies:

Previous guidance on the achievement of $46.5 million of net milestones in 2016 related to ONIVYDE is comprised of the anticipated achievement of $85.0 million of milestone obligations from Shire and $38.5 million of offsetting milestone obligations to PharmaEngine. Of the anticipated $85.0 million of milestone obligations from Shire, $75.0 million are expected to be classified as substantive milestones that would increase license and collaboration revenues and the remaining $10.0 million are expected to be classified as non-substantive milestones that would be recognized through Merrimack’s proportional performance revenue recognition model; and
Previous guidance for aggregate research and development and selling, general and administrative expenses for 2016, when calculated in accordance with GAAP, was in the range of $263.5 million to $283.5 million, which included the anticipated achievement of $38.5 million of milestone obligations to PharmaEngine. This corresponds to Merrimack’s previously disclosed guidance that aggregate research and development and selling, general and administrative expenses, excluding anticipated milestone obligations to PharmaEngine, a non-GAAP financial measure, would be in the range of $225.0 million to $245.0 million for 2016.
With respect to its fiscal 2016 guidance, Merrimack:

Lowers its previously provided expense guidance range by $20.0 million, such that Merrimack now anticipates aggregate research and development and selling, general and administrative expenses for 2016, when calculated in accordance with GAAP, to be in the range of $243.5 million to $263.5 million. Excluding anticipated milestone obligations to PharmaEngine of $38.5 million, this corresponds to a range of $205.0 million to $225.0 million for 2016, which is a non-GAAP financial measure.
A table reconciling guidance for aggregate research and development and selling, general and administrative expenses, excluding anticipated milestone obligations to PharmaEngine, a non-GAAP financial measure, to aggregate research and development and selling, general and administrative expenses calculated in accordance with GAAP is included at the end of this press release.