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What's in the Cards for Merrimack (MACK) in Q2 Earnings?

Merrimack Pharmaceuticals, Inc. MACK is expected to report second-quarter 2017 results around Aug 3. Last quarter, Merrimack missed bottom line expectations by 214.29%.

Merrimack’s share price has decreased 67.4% year to date against the industry’s gain of 10%.

Let’s see how things are shaping up for the company this quarter.

Factors to Consider

The first quarter of 2017 was the last quarter in which Merrimack recorded Onivyde sales. Onivyde’s launch was disappointing and sales of the drug have not been very impressive. The company was struggling to market the drug properly. Hence, Merrimack sold its only marketed product Onivyde and generic version of Doxil to Ipsen S.A. The deal closed in Apr 2017. Now with no approved or marketed drugs in its portfolio, investors will focus on pipeline development at the company’s second quarter conference call.

The company received $575 million in cash from its asset sale to Ipsen.

Merrimack is also eligible to receive up to $450 million in additional regulatory approval-based milestone payments as part of the deal. Moreover, the company has retained the rights to milestone payments of up to $33 million from a previous license and collaboration agreement with Shire plc (SHPG) for the development and commercialization of Onivyde outside the U.S.

The company used the proceeds from the sale to reduce outstanding debt by redeeming senior notes debt due in 2022 and invested in the development of its oncology pipeline.

Merrimack plans to use a part of the proceeds from its assets sale and focus its resources on the development of three pipeline candidates – MM-121/seribantumab (heregulin-positive, locally advanced or metastatic non-small cell lung cancer (NSCLC), MM-141/istiratumab (pancreatic cancer) and MM-310 (solid tumor).

Merrimack announced that it has completed enrollment in a phase II study, CARRIE, on MM-141 for metastatic pancreatic cancer. The company may provide a preliminary update on the study in its earnings call.

Surprise History

Merrimack’s track record has been dismal so far with a four-quarter average negative earnings surprise of 55.56%. The company has missed estimates thrice in the four trailing quarters while beating the same only once.

Earnings Whispers

Our proven model does not conclusively show that Merrimack is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates. But that is not the case here, as you will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 14 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Although Merrimack’s Zacks Rank #3 increases the predictive power of ESP, its 0.00% ESP makes surprise prediction difficult this quarter.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrants a Look

Here are a couple of health care stocks that you may want to consider, as our model shows that it has the right combination of elements to post an earnings beat this quarter.

Clovis Oncology, Inc. CLVS has an Earnings ESP of +6.30% and a Zacks Rank #3. The company is scheduled to release results on Aug 2.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Arena Pharmaceuticals, Inc. ARNA has an Earnings ESP of +5.88% and a Zacks Rank #2. The company is expected to release results on Aug 14.

Biodel Inc. ALBO has an Earnings ESP of +4.82% and a Zacks Rank #2. The company is expected to release results on Aug 10.

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