Baxter International, Inc.'s Deal With Merrimack Pharmaceuticals Inc. All Upside: Analyst

Published: Sep 24, 2014

Baxter International Inc.’s Deal With Merrimack All Upside: Analyst

September 24, 2014

By Riley McDermid, BioSpace.com Breaking News Sr. Editor

Baxter International, Inc. ’s announcement of an exclusive deal with Merrimack Pharmaceuticals Inc. to develop and commercialize lead cancer drug MM-398 is a positive development for the firm, an analyst with Guggenheim Securities said Wednesday.

“We view this deal as a clear positive for Merrimack as it should alleviate concerns regarding the company's NT financing needs and provides important validation of MM-398's commercial potential in advanced PC,” wrote Bret Holley, a biotech analyst for Guggenheim, in a note to investors. “We continue to believe Merrimack is attractive, and we would buy the stock on strength related to today's news.”

Under the terms of the licensing and collaboration agreement with, Merrimack will receive an upfront payment from Baxter of $100 million and an additional $120 million in regulatory milestones related to the first pancreatic cancer therapeutic.

The company could see a potential $280 million in developmental and regulatory milestone payments for any additional indication of cancer of the pancreas. For two more indications, Cambridge, Mass.-based Merrimack could receive another $220 million and yet another $250 million in sales milestones.

All of that is good news for Merrimack, said Holley, particularly because the company will continue to hold the American rights to the drug.

“In total, Merrimack can receive development, regulatory, and sales milestones exceeding $1 billion under terms of the agreement,” wrote Holley. “Importantly, the company retains U.S. rights for MM-398 and will also receive tiered royalty payments starting in the lower double digits on ex-U.S. sales of the drug.” Guggenheim retained its buy rating on the stock, partially based on potential upside for both companies as they debut similar drugs and navigate regulatory approval.

“Merrimack and Baxter are planning to advance MM-398 in frontline PC as well as additional undisclosed cancer indications,” wrote Holley. “Consistent with prior guidance, Merrimack intends to file an NDA for MM-398 by year end of 2014 and we see a high probability of U.S. approval of the drug in the second half of 2015.”

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