Merrimack - Not Bad News?

Wednesday, Merrimack (NASDAQ: MACK) released top-line data of its anti ERBb3 antibody MM121 in platinum-resistant ovarian cancer. The "top line" data reads as a "fail" and the share-price is falling as a result of this.

As I outlined in a previous Seeking Alpha article, the company was not expecting this antibody to work in all cases of ovarian cancer. The basis of MACK's "network biology platform", and of personalised medicine in general is that toxic drugs are only given to those who will benefit from it.

As the company predicted, in the subgroup of ovarian cancers expressing a specific set of biomarkers, MM121 works well. An odds ratio of 0.37 means that this subgroup of patients has a 63% lower chance of tumor progression than controls. This subgroup - 34% of the total patient population (still a large number in absolute terms) will be the group that the pivotal phase III trial will enroll. When the whole cohort is analyzed, the non-responders dilute out the responders, making the trial look like a "failure". This approach, in theory, substantially de-risks the phase III trial. However, poor communication has led to negative investor sentiment.

What does this trial mean for MACK? I believe that this is actually positive news in terms of validating the fact that the company has the means to identify groups of previously untreatable patients who can benefit from their novel antibody treatments, and it seems as if these treatments may work (albeit that a blinded, phase III trial is necessary to prove this). The company has a large number of antibodies in their pipeline using the same 'network biology' platform, so this first demonstration that their technology works is pivotal.

As a long-term shareholder, it's frustrating that the word "failure" is associated with the results of this trial. One view is that this trial goes some way towards validating MACK's platform for targeted cancer therapeutics. It is perhaps noteworthy that Sanofi (NYSE:SNF), who is paying for the clinical development of 121, has chosen to remain silent. Of course, as potential purchasers of MACK, it will find a depressed share-price advantageous in negotiating a price for a takeover. It is clearly not advantageous for SNF to blow the trumpet of MM-121, as it will result in an increased stock price for MACK, increasing the potential takeover cost.

I remain long MACK, but I remain frustrated by the company's communications with the investing public.

Disclosure: I am long MACK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.