By Bill Berkrot
NEW YORK (Reuters) - Little known biotechnology company Merrimack Pharmaceuticals Inc has quietly built a large pipeline of experimental cancer treatments that it aims to deliver at a fraction of the cost spent by larger rivals.
That could translate into lower-cost treatments for large unmet needs, such as pancreatic cancer, at precisely the time when pressure is mounting to reduce runaway healthcare spending.
Despite six drugs in clinical development - one of them in late-stage trials - and two more about to advance to human testing, Merrimack is burning only about $20 million a quarter.
"For the size and scale of what we do, that's eye poppingly low," Merrimack Chief Executive Robert Mulroy told Reuters.
"Our cost structure is orders of magnitude lower than anybody to date in this business. Our cost from starting a discovery program to getting into the clinic is less than $20 million, and the industry average is close to half a billion per molecule," he said in an interview this week.
"Hopefully, we're going to get to less expensive drugs because our capital costs to be successful with them will be so much lower."
That would be music to the ears of payers and the overtaxed U.S. Medicare system contending with new cancer treatments that can exceed $100,000 per patient.
Started by six professors from Harvard and the Massachusetts Institute of Technology in 2000, Merrimack is nearing the finish line with what could be its first commercial product, a nanotherapeutic treatment for pancreatic cancer - a disease for which patients currently have few options.
Shares of Merrimack, which has a market value of about $500 million, are down nearly 16 percent this year, while the biotech sector overall has been on the rise.
Brean Capital analyst Gene Mack said investors have been wary about the prospects for the company's lead drug because the failure rate for pancreatic cancer drugs has been high and Merrimack is testing its drug in patients that have failed prior treatment - a population with a very poor prognosis.
"Investors don't realize how much progress has been made in the last year," Mack said. "Fundamentally, this is my favorite company (worth) under a billion dollars."
Late-stage trial data on the lead drug candidate, known as MM-398, is expected the second half of this year. If the study succeeds, the company could file for approval late this year or early in 2014.
MM-398 is designed to treat a particular type of tumor - hypoxic tumors - that tend to be resistant to standard therapies because of poor blood flow to the tumor.
"You don't have a lot of highways to the tumor so you don't get a lot of drug there," Mulroy explained.
The Merrimack technology is designed to deliver cancer-killing therapy directly into the tumor and have it work for far longer than other new medicines that directly target tumors.
"Our technology keeps the drug in the tumor for over a week as opposed to just a few hours," Mulroy said.
Hypoxic tumors are very common in pancreatic cancer, making it notoriously difficult to treat, but are also present in many other types of solid tumors.
Merrimack is developing a companion diagnostic test that uses a radioactive imaging agent to identify hypoxic tumors. If the test works as intended, MM-398 could also eventually treat lung, breast, colon and other cancers if patients are found to have the right type of tumor, giving it a huge potential market. The company plans to test MM-398 in combination with chemotherapies and targeted biotech medicines.
Merrimack also has a drug, MM-111, in Phase II testing for gastric cancer, for which there is an enormous unmet need, particularly in China and Asia.
The company has enough cash to fund its numerous clinical trials for the rest of this year and take MM-398 through to approval and commercialization, Mulroy said.
The company has full rights to seven of the eight drugs in clinical development and hopes to retain them for the U.S. and European markets while looking for partners to sell the medicines in other parts of the world, the CEO said.
French drugmaker Sanofi acquired global rights to the Merrimack drug MM-121, being tested in lung, breast and ovarian cancer. Merrimack, which will get milestone payments and royalties on future sales of the medicine, expects data from four Phase II trials of MM-121 later this year.
In another vote of confidence, Sanofi is the company's second-largest shareholder with more than a 5 percent stake, according to Thomson Reuters data.
Merrimack's share performance over the second half of the year will hinge on a steady flow of clinical data, with four Phase II studies and the pivotal Phase III on MM-398 expected to be reported in the coming months.
"There will be plenty of opportunities to show that the technology works," Mulroy said. "We're in a big transition year for us."
(Reporting by Bill Berkrot; editing by Ed Tobin and John Wallace)