NEW YORK (TheStreet) -- Merrimack Pharmaceuticals (MACK) recently announced MM-398 achieved its primary endpoint of overall survival in a phase III trial in post-gemcitabine metastatic pancreatic cancer. The trial compared the combination of MM-398, 5-fluorouracil (5-FU), and leucovorin to 5-FU and leucovorin.
The addition of MM-398 increased the median overall survival by 1.9 months (6.1 versus 4.2 months) -- a statistically significant difference.
Let's take a look at what these results mean for Merrimack and MM-398.
MM-398 is a nanoliposomal encapsulation of the chemotherapeutic agent irinotecan. In other words, it is not a new drug but simply a reformulation of an older chemotherapeutic agent. (Merrimack and its supporters believe MM-398 is an entirely new drug but I disagree.) The nanoliposomal encapsulation of MM-398 is designed to increase circulation time and tumor penetration, thereby increasing efficacy and tolerability. In many ways, this is the same logic behind Celgene's (CELG) Abraxane, which is a protein-bound paclitaxel approved to treat breast and lung cancer, and most recently pancreatic cancer.
The commercial potential of MM-398 is not entirely clear, despite the positive pancreatic cancer trial and an FDA approval that will likely come from it. MM-398 is going to be plagued by the same questions that hit Abraxane: Are the costs worth the relatively minor benefit in survival?
While pancreatic cancer patients are in desperate need of new therapies, a 1.9-month prolongation of survival is still a marginal benefit. With increasing questions about the cost of drugs, I would worry about push back from doctors and insurance companies. If payers are belly-aching about paying $80,000 to cure hepatitis C, are they going to pay the same amount so a pancreatic cancer patients can live another two months?
Merrimack bulls might point to Abraxane as the successful commercial model to emulate. Celgene has done a good job expanding Abraxane use into pancreatic cancer. However, questions about the cost benefit of drugs is more pronounced today than when Abraxane entered the pancreatic cancer treatment market. Celgene also has a significant advantage in both commercial reach and experience, so it is not clear Merrimack is positioned to succeed in that same manner.
Merrimack cannot even claim a benefit of MM-398 over regular irinotecan. The control group in the phase III study did not contain a non-nanoliposomal encapsulated irinotecan, so is the benefit being driven by MM-398 or simply the addition of irinotecan? We cannot say either way, as you would need a head to head trial to see if MM-398 is actually better than irinotecan. This doesn't mean MM-398 isn't superior, only that the question is left unanswered. The risk remains that someone may simply replicate the results from Merrimack's trial with regular irinotecan.
While I always add the caveat about comparing across different trials, it is often the only way to partially address important questions. In this case, an earlier study in post-gemcitabine treatment patients with advanced pancreatic cancer showed the use of single-agent irinotecan generated a median overall survival of 6.6 months with relatively minor adverse events. This appears quite similar to the MM-398 results and just reinforces questions about the advantage of MM-398 over irinotecan.
Ultimately, the investment case for Merrimack boils down to MM-398 pricing. If Merrimack prices the drug too high, uptake is likely to be severely limited. In the worst case, doctors will speak out publicly, like they did last year against Regeneron Pharma's (REGN) colon cancer drug Zaltrap.
Sobek has no position in Merrimack and is long Celgene.