Analyst Conference Summary

conference date: February 25, 2016 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2015 (Q4, fourth quarter 2015)

Forward-looking statements

Overview: First FDA approval during the quarter ended with first ever product revenue.

Basic data (GAAP):

Revenue was $21.4 million, up sequentially from $16.4 million, but down from $33.9 million in the year-earlier quarter.

Net income was negative $48.1 million, down sequentially from negative $42.4 million, and down from negative $9.5 million year-earlier.

EPS was negative $0.41, down sequentially from negative $0.38 and down from negative $0.09 year-earlier.

Guidance:

In 2016 Onivyde milestone payments from Baxalta should total $46.5 million. $50 million should be recognized in proportionate milestone model. Adjusted operating expenses $225 to $245 million, excluding any one-time payments to PharmaEngine. No guidance for Onivyde revenue yet.

Conference Highlights:

The FDA approved ONIVYDE™ (irinotecan liposome injection) (formerly MM-398) for post-gemcitibine metastatic pancreatic cancer on October 22, 2015. The total addressable market for the current label is believed to be $800 million per year. The response from the oncology community has been quick and positive. In the remainder of 2016 Merrimack will continue the commercial launch of Onivyde. There are about 18,500 post-gemcitabine pancreatic cancer patients in the U.S.

Onivyde product revenue for the partial quarter was $4.3 million. License and collaboration revenue was $17.1 million. Received a $47.5 million milestone payment from Baxalta for dosing of first patient in the frontline pancreatic cancer trial, but not all was recognized in the quarter.

Onivyde launch is going well. Focus is on access to accounts. Believes ramp up should be significant. Gross revenue was $5.0 million, with net of $4.3 million in Q4. No significant stocking. 250 facilities recieved the drug. Reached about 10% of patients in the label that could start in the period. Started with about 300 patients. Continues to see growth in 2016. But it can take time to get added to P&T lists. Feedback from payers is that Onivyde will be covered to the label.

The MM-398 program was expanded to metastatic breast cancer. After the quarter ended a Phase 2 clinical trial of Onivyde for front-line metastatic pancreatic cancer enrolled its first patient. A total of 5 cancer types will be targeted by Baxalta and Merrimack with Onivyde in the next round of trials.

The updated survival data for the Phase 3 NAPOLI-1 study of Onivyde (in combination) for metastatic pancreatic adenocarcinoma achieved a 63% improvement in 12 months survival compared to flourouracil and leucovrin alone.

HERMIONE Phase 2 trial for MM-302 for third line HER-2 positive breast cancer continued, in combination with herceptin. Enrollment should complete in 2016 with data in 2017.

MM-121 Phase 2 trial in non-small cell lung cancer also continues to enroll. Amended the primary endpoint to overall survival. Data should report in the second half of 2016. Seeing strong interest from potential partners in collaborating in MM-121 for breast cancer.

An MM-141 Phase 2 clinical trial in 2015 for frontline pancreatic cancer who have high serum IGF-1 levels, in combination with existing therapies, continues. MM-141 is believed to sensitize tumors to the nab-paclitaxel and gemcitabine combination. Only 146 biomarker positive patients will be enrolled. Results could be available in 2017.

See also the Merrimack Pipeline.

Cash and equivalents ended at $185.6 million, up sequentially from $62.4 million. Lists $418 million in total liabilities. Issued $175 million in senior secured notes and used $41 million of that to repay the full private loan.

Merrimack believes it has cash to fund operations into 2017, assuming Baxalta milestones are realized. Sales of Onivyde would further extend the cash runway. In 2016 $46.5 million Baxalta milestone payments should come in.

Operating expenses were $64.1 million, consisting of: $44.7 million for R&D; and $19.3 million for general and administrative expenses. Operating profit was negative $42.7 million. Other expenses were $5.4 million.

Several competitor late-stage pancreatic cancer therapy programs have been terminated in the last few months, showing the value of Onivyde.

There will be an analyst day on May 19.

Q&A:

Onivyde repeat prescription patterns, duration of therapy, discontinuation? We can't track to the subscriber level. At the account and facility level we have seen strong growth, and most facilities have had multiple shipments. We will follow duration of therapy, the average time would be expected to be 4 months, we have not been out long enough to get the data yet.

Paperwork for remaining third of payers? P&T committees can take some time, it varies by the institution. About one-third have already given approvals, pushed by oncologists. No guidance on the ramp yet.

Supply chain? We are in good shape from manufacturing through distribution. We have built up some inventory to handle growth.

Shire deal with Baxalta update, European launch? Right now we are continuing to work with Baxalta on global approvals. If a transaction is completed we will share what we know with you.

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