Is a Beat in the Cards for Merrimack (MACK) in Q2 Earnings?

Merrimack Pharmaceuticals, Inc MACK is scheduled to report second-quarter 2018 results on Aug 7 before the market opens.

The company’s earnings history has been a mixed bag so far, having missed expectations on two occasions and beating the same on the other two with an average positive surprise of 11.90%. Last reported quarter, Merrimack lagged estimates with a negative surprise of 3.91%.

However, shares of Merrimack have plunged 49.6% year to date, wider than the industry’s decline of 6%.

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

Factors at Play

Merrimack divested its only marketed product, Onivyde, last year to Ipsen. The sale is a positive for the company given the fact that the company was earlier struggling to market the drug properly. It received $575 million in cash from the asset divestiture.

With the sale of Onivyde, Merrimack is back to being a development-stage biopharmaceutical company. Hence, it now focuses on the development of its two early-stage pipeline candidates, namely MM-121/seribantumab and MM-310 (solid tumor).

MM-121 is currently being evaluated in two phase II studies. A phase II SHERLOC trial is evaluating MM-121 on advanced non-small cell lung cancer patients, who are heregulin positive. Top-line data is expected in the second half of 2018.

A phase I program on MM-310 is under way to evaluate its safety in patients with solid tumors and to identify its maximum tolerated dose. The company anticipates to report safety data and the maximum tolerated dose from the study during the second half of 2018.

Investors will focus on updates from these two candidates on second-quarter conference call.

However, in June, Merrimack faced a major pipeline setback when it terminated the development of MM-141 following disappointing results from a phase II analysis, CARRIE, on front-line metastatic pancreatic cancer. The study did not meet primary and secondary efficacy endpoints in patients, who received MM-141 in combination with nab-paclitaxel and Gemzar as compared to nab-paclitaxel and Gemzar alone.

Earnings Whispers

Our proven model indicates that Merrimack is likely to beat earnings estimates this quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen and Merrimack precisely has the right mix.

Earnings ESP: Merrimack has an Earnings ESP of +12.73%, representing the difference between the Most Accurate Estimate and the Zacks Consensus Estimate. A positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Merrimack has a Zacks Rank #3, which increases the predictive power of ESP. Thus, the combination of a positive ESP and a solid Zacks Rank makes us reasonably confident about an earnings beat this reporting cycle.

Conversely, we caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks That Warrant a Look

Here are some other health care stocks worth considering from the same space with the perfect combination of elements to also beat on earnings this time around.

Editas Medicine, Inc. EDIT has an Earnings ESP of +5.11% and a Zacks Rank #2. The company is scheduled to release second-quarter results on Aug 6 after the market closes. You can see the complete list of today’s Zacks #1 Rank stocks here.

Curis, Inc. CRIS has an Earnings ESP of +2.44% and a Zacks Rank of 2. The company is scheduled to release second-quarter results on Aug 2 before the market opens.

Aimmune Therapeutics, Inc. AIMT has an Earnings ESP of +12.38% and a Zacks Rank of 3. The company is expected to release second-quarter results on Aug 14.

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