Net Loss Per Common Share

9 Months Ended

Sep. 30, 2013

Net Loss Per Common Share

Net Loss Per Common Share

3. Net Loss Per Common Share

Basic net loss per share is calculated by dividing the net loss available to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is computed by dividing the net loss available to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, convertible preferred stock, stock options and warrants are considered to be common stock equivalents and are only included in the calculation of diluted net loss per share when their effect is dilutive.

The following table presents the computation of basic and diluted net loss per share available to common stockholders for the three and nine months ended September 30, 2012 and 2013:

	Three months ended September 30,						Nine months ended September 30,
(in thousands, except per share amount)	2012			2013			2012			2013
Net Loss Per Share:
Numerator:
Net loss attributable to Merrimack Pharmaceuticals, Inc.	$	(23,199	)	$	(39,631	)	$	(66,509	)	$	(97,866	)
Plus: Unaccreted dividends on convertible preferred stock	—			—			(2,107		)	—
Net loss available to common stockholders—basic and diluted	(23,199		)	(39,631		)	(68,616		)	(97,866		)
Denominator:
Weighted-average common shares—basic and diluted	93,724			101,155			65,487			97,754
Net loss per share available to common stockholders—basic and diluted	$	(0.25	)	$	(0.39	)	$	(1.05	)	$	(1.00	)

As discussed in Note 7, in July 2013, the Company issued $125.0 million aggregate principal amount of 4.50% convertible senior notes due 2020 (the “Notes”) in an underwritten public offering. Upon any conversion of the Notes while the Company has indebtedness outstanding under the Loan and Security Agreement (the “Loan Agreement”) with Hercules Technology Growth Capital, Inc. (“Hercules”), the Notes will be settled in shares of the Company’s common stock. Following the repayment and satisfaction in full of the Company’s obligations to Hercules under the Loan Agreement, upon any conversion of the Notes, the Notes may be settled, at the Company’s election, in cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock. For purposes of calculating the maximum dilutive impact, it is presumed that the conversion premium will be settled in common stock, inclusive of a contractual make-whole provision resulting from a fundamental change, and the resulting potential common shares included in diluted earnings per share if the effect is more dilutive. The stock options, warrants and conversion premium on the Notes are excluded from the calculation of diluted loss per share because the net loss for the three and nine months ended September 30, 2012 and 2013 causes such securities to be anti-dilutive. The potential dilutive effect of these securities is shown in the chart below:

	As of September 30,
(in thousands)	2012	2013
Options to purchase common stock	19,812	20,355
Common stock warrants	2,891	2,777
Conversion premium on the Notes	—	25,000