Seeking Alpha
, IPOpremium (848 clicks)
Value, IPOs, long only
Profile| Send Message|
( followers)  

Based in Cambridge, Massachusetts, Merrimack Pharmaceuticals (proposed MACK) scheduled a $150 million IPO with a market capitalization of $855 million at a price range mid-point of $9 for Wednesday, February 1, 2012.

MACK is one of eight IPOs scheduled for this week (see our IPO calendar).

SUMMARY

MACK is a biopharmaceutical company with four cancer treatment programs in clinical development, with seemingly good results. The most advanced program is expected to enter a pivotal Phase 3 clinical trial by the end of 2011.

MACK has partnered MM-121 with Sanofi (NYSE:SNY) ($97 billion market cap) after MACK initiated Phase 1 clinical development of MM-121. Sanofi paid MAC an upfront license fee of $60 million and is responsible for all of the development and manufacturing costs under the collaboration. MAC is entitled to tiered royalties and aggregate clinical, regulatory and sales milestones of up to $470 million, of which MAC has already received $20 million for achieving two clinical milestones.

CONCLUSION

We believe investors should avoid MACK on the IPO, but watch to see what clinical trial progress is made. MACK's hoped for $855 million valuation appears high right now. However, if stage three clinical trials are successful then MACK could become an institutional favorite overtime.

MACK does have multiple cancer treatment candidates which could be blockbusters. MACK also has a unique 'network biology' approach, see below.

BUSINESS

MACK is a biopharmaceutical company discovering, developing and preparing to commercialize innovative medicines paired with companion diagnostics for the treatment of serious diseases, with an initial focus on cancer.

MACK's mission is to provide patients, physicians and the healthcare system with the medicines, tools and information to transform the approach to care from one based on the identification and treatment of symptoms to one focused on the diagnosis and treatment of illness through a more precise mechanistic understanding of disease.

The company seeks to accomplish its mission by applying a proprietary systems biology-based approach to biomedical research, which MACK calls Network Biology.

MACKS vision is to apply Network Biology to become a global healthcare enterprise that is founded on leading science and driven to deliver integrated healthcare solutions that improve both the quality of patient outcomes and the efficiency of care.

NETWORK BIOLOGY

Network Biology is an interdisciplinary approach to drug discovery and development that enables MACK to build functional and predictive computational models of biological systems based on quantitative, kinetic, multiplexed biological data.

PRODUCT CANDIDATES

MACK'sr most advanced product candidates are:

  • MM-398: MM-398 is a novel, stable nanotherapeutic encapsulation, or enclosed sphere carrying an active drug, of the marketed chemotherapy drug irinotecan.

MACK is conducting a pivotal Phase 3 clinical trial of MM-398 for the treatment of patients with metastatic pancreatic cancer who have previously failed treatment with gemcitabine.

In July 2011, the U.S. Food and Drug Administration, or FDA, granted MM-398 orphan drug designation for the treatment of pancreatic cancer.

  • MM-121: MM-121 is a fully human monoclonal antibody that targets ErbB3, a cell surface receptor, or protein attached to the cell membrane that mediates communication inside and outside the cell, that MACK's Network Biology approach identified as a potentially important target in a range of cancers. .

MACK partnered MM-121 with Sanofi after MACK initiated Phase 1 clinical development of this product candidate. Sanofi paid MAC an upfront license fee of $60 million and is responsible for all of the development and manufacturing costs under the collaboration. MAC is entitled to tiered royalties and aggregate clinical, regulatory and sales milestones of up to $470 million, of which MAC has already received $20 million for achieving two clinical milestones.

  • MM-111: MM-111 is a bispecific antibody designed to target cancer cells that are characterized by overexpression of the ErbB2 cell surface receptor, also referred to as HER2.
  • MM-302: MM-302 is a nanotherapeutic encapsulation of doxorubicin with attached antibodies that are designed to target MM-302 to cells that overexpress the ErbB2 (HER2) receptor.

MM-151: MM-151 is an oligoclonal therapeutic consisting of a mixture of three fully human monoclonal antibodies designed to bind to non-overlapping epitopes of the epidermal growth factor receptor, or EGFR. EGFR is also know as ErbB1.

COMPETITION

While MACK believes that its Network Biology technologies, integrated research, clinical and manufacturing capabilities, development experience and scientific knowledge provide it with competitive advantages, MACK faces potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions.

The most common methods of treating patients with cancer are surgery, radiation and drug therapy, including chemotherapy and targeted drug therapy.

Some of these drugs are branded and subject to patent protection, and others are available on a generic basis, including the active ingredients in MM-398 and MM-302.

In addition to the marketed therapies there are also a number of products in late stage clinical development to treat solid tumors.

USE OF PROCEEDS

MACK expects to net $138 million from its IPO. As of September 30, 2011, MACK had cash and cash equivalents of $59.2 million.

MACK intends to use $4.3 million from its IPO to pay accrued dividends on its series B convertible preferred stock. The balance of the proceeds together with cash and cash equivalents is allocated to clinical trials, other R&D efforts and to fund working capital.

Source: IPO Preview: Merrimack Pharmaceuticals