mack-10q_20190630.htm

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 10, 2019, there were 13,349,821 shares of Common Stock, $0.01 par value per share, outstanding.

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in Part II, Item 1A. Risk Factors, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments that we may make.

You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

ONIVYDE^® is a trademark of Ipsen S.A. Any other trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q are the property of their respective owners.

(in thousands, except per share amounts)	June 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	36,917		$	20,079
Marketable securities		2,987			51,199
Restricted cash		584			584
Prepaid expenses and other current assets		2,069			4,240
Total current assets		42,557			76,102
Property and equipment, net		—			2,269
Equity method investment		—			7,428
Other assets		2,483			2,744
Total assets	$	45,040		$	88,543
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable, accrued expenses and other	$	4,940		$	13,677
Deferred rent		—			1,118
Total current liabilities		4,940			14,795
Note payable, net of discount and current portion		—			14,873
Other long-term liabilities		56			56
Total liabilities		4,996			29,724
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value: 10,000 shares authorized at June 30, 2019 and December 31, 2018; no shares issued or outstanding at June 30, 2019 or December 31, 2018		—			—
Common stock, $0.01 par value: 30,000 shares authorized at June 30, 2019 and December 31, 2018; 13,349 and 13,343 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively		1,334			1,334
Additional paid-in capital		581,875			580,771
Accumulated other comprehensive loss		—			(9	)
Accumulated deficit		(543,165	)		(523,277	)
Total stockholders’ equity		40,044			58,819
Total liabilities and stockholders’ equity	$	45,040		$	88,543

The accompanying notes are an integral part of these condensed consolidated financial statements.

Merrimack Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share amounts)	2019			2018			2019			2018
Operating expenses:
Research and development expenses	$	4,739		$	13,678		$	11,100		$	26,784
General and administrative expenses		5,929			3,513			9,612			7,783
Gain on sale of assets		(1,410	)		—			(1,410	)		—
Total operating expenses		9,258			17,191			19,302			34,567
Loss from operations		(9,258	)		(17,191	)		(19,302	)		(34,567	)
Other income and expenses:
Interest income		207			282			572			557
Interest expense		(1,049	)		—			(1,527	)		—
Other (expense) income, net		670			(860	)		369			(1,541	)
Total other income and expenses		(172	)		(578	)		(586	)		(984	)
Net loss	$	(9,430	)	$	(17,769	)	$	(19,888	)	$	(35,551	)
Net loss per common share - basic and diluted	$	(0.71	)	$	(1.33	)	$	(1.49	)	$	(2.66	)
Weighted-average common shares used to compute basic and diluted net loss per common share		13,344			13,343			13,343			13,343
Comprehensive loss:
Net loss	$	(9,430	)	$	(17,769	)	$	(19,888	)	$	(35,551	)
Unrealized gain (loss) on marketable securities		—			11			9			(1	)
Comprehensive loss	$	(9,430	)	$	(17,758	)	$	(19,879	)	$	(35,552	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Common Stock
(in thousands)	Shares		Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2018		13,343	$	1,334	$	580,771	$	(9	)	$	(523,277	)	$	58,819
Stock-based compensation		—		—		594		—			—			594
Unrealized gain on marketable securities		—		—		—		9			—			9
Net loss		—		—		—		—			(10,458	)		(10,458	)
Balance at March 31, 2019		13,343	$	1,334	$	581,365	$	—		$	(533,735	)	$	48,964
Stock-based compensation		—		—		487		—			—			487
Exercise of stock options		6		—		23		—			—			23
Net loss		—		—		—		—			(9,430	)		(9,430	)
Balance at June 30, 2019		13,349	$	1,334	$	581,875	$	—		$	(543,165	)	$	40,044

	Common Stock
(in thousands)	Shares		Amount		Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity
Balance at December 31, 2017		13,343	$	1,334	$	577,721	$	—		$	(482,771	)	$	96,284
Stock-based compensation		—		—		764		—			—			764
Unrealized loss on marketable securities		—		—		—		(12	)		—			(12	)
Net loss		—		—		—		—			(17,782	)		(17,782	)
Balance at March 31, 2018		13,343	$	1,334	$	578,485	$	(12	)	$	(500,553	)	$	79,254
Stock-based compensation		—		—		780		—			—			780
Unrealized loss on marketable securities		—		—		—		11			—			11
Net loss		—		—		—		—			(17,769	)		(17,769	)
Balance at June 30, 2018		13,343	$	1,334	$	579,265	$	(1	)	$	(518,322	)	$	62,276

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Six Months Ended June 30,
(in thousands)	2019			2018
Cash flows from operating activities
Net loss	$	(19,888	)	$	(35,551	)
Adjustments to reconcile net loss to net cash used in operating activities
Non-cash interest expense		141			—
Loss on extinguishment of debt		971			—
Depreciation and amortization expense		2,228			2,258
Loss (gain) on sale of equipment		(1,984	)		184
Premiums paid on marketable securities		—			(40	)
Amortization and accretion on marketable securities		(279	)		(223	)
Stock-based compensation expense		1,081			1,544
Loss (gain) on equity method investment		(372	)		1,417
Changes in operating assets and liabilities:
Prepaid expenses and other assets		2,432			(79	)
Accounts payable, accrued expenses and other		(9,855	)		(2,037	)
Deferred rent		—			(1,055	)
Net cash used in operating activities		(25,525	)		(33,582	)
Cash flows from investing activities
Purchase of property and equipment		—			(118	)
Proceeds from sale of equipment		2,025			—
Proceeds from sale of equity method investment		7,800			—
Proceeds from maturities and sales of marketable securities		48,500			11,050
Purchases of marketable securities		—			(48,331	)
Net cash provided by (used in) investing activities		58,325			(37,399	)
Cash flows from financing activities
Proceeds from exercise of stock options		23			—
Repayment of debt		(15,000	)		—
Payment of debt extinguishment costs		(985	)		—
Net cash used in financing activities		(15,962	)		—
Net increase (decrease) in cash, cash equivalents and restricted cash		16,838			(70,981	)
Cash, cash equivalents and restricted cash, beginning of period		20,663			94,217
Cash, cash equivalents and restricted cash, end of period	$	37,501		$	23,236
Non-cash investing activities
Supplemental disclosure of cash flows
Cash paid for interest		1,399			—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Merrimack Pharmaceuticals, Inc. (the “Company”) is a biopharmaceutical company based in Cambridge, Massachusetts that is entitled to receive up to $455.0 million in contingent milestone payments related to its sale of ONIVYDE^® to Ipsen S.A. (“Ipsen”) in April 2017. The Company does not have any ongoing research or development activities and is seeking potential acquirers for its remaining preclinical and clinical assets. The Company does not have any employees and instead uses external consultants for the operation of the Company.

On April 3, 2017, the Company completed the sale to Ipsen (the “Ipsen Sale”) of ONIVYDE and MM-436. In connection with the Ipsen Sale, the Company is eligible to receive up to $450.0 million in additional regulatory approval-based milestone payments. The Company also retained the right to receive net milestone payments that may become payable for the ex-U.S. development and commercialization of ONIVYDE for up to $33.0 million pursuant to a license and collaboration agreement (the “Servier Agreement”) between Ipsen and Les Laboratoires Servier SAS (“Servier”) (as assignee from Shire plc). The Company entered into the Servier Agreement in 2014, and on April 3, 2017, the Servier Agreement was assigned to Ipsen in connection with the completion of the Ipsen Sale. To date, the Company has received $28.0 million of the potential $33.0 million in milestone payments under the Servier Agreement.

The remaining up to $455.0 million in potential milestone payments resulting from the Ipsen Sale consist of:

On May 30, 2019, the Company announced the completion of its review of strategic alternatives, following which the Company’s Board of Directors implemented a series of measures designed to extend the Company’s cash runway and preserve its ability to capture the potential milestone payments resulting from the Ipsen Sale. In connection with that announcement, the Company discontinued the discovery efforts on its remaining preclinical programs: MM-401, an agonistic antibody targeting a novel immuno-oncology target, TNFR2; and MM-201, a highly stabilized agonist-Fc fusion protein targeting death receptors 4 and 5. The Company is seeking potential acquirers for its remaining preclinical and clinical assets.

The Company’s termination of its executive management team and all other employees was substantially completed by June 28, 2019 and fully completed by July 12, 2019. As of July 12, 2019, the Company does not have any employees. The Company has engaged an external consultant to run the day-to-day operations of the Company. The Company has also entered into consulting agreements with certain former members of its executive management team.

In May 2019, the Company monetized certain assets to strengthen its cash position. This includes the sale of its entire equity position in Silver Creek Pharmaceuticals, Inc. (“Silver Creek”), resulting in $7.8 million in cash, and the sale of laboratory equipment from its research and development operations, resulting in approximately $1.4 million in cash.

On April 15, 2019, the Company repaid in full all principal, accrued and unpaid interest, fees, costs and expenses under its Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”) in an aggregate amount equal to $16.0 million.

The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including, among other things, its ability to secure additional capital to fund operations, development by competitors of new technological innovations, protection of proprietary technology and compliance with government regulations. None of the Company’s product candidates are approved for any indication by the FDA or any other regulatory agency. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies, among others. In addition, the Company is dependent upon the services of its external consultants for the operation of the Company. The Company’s business strategy depends substantially upon its ability to receive future milestone payments from Ipsen and Servier. Any failure to achieve such milestones or a perception that the milestones may not be achieved will materially and adversely affect the Company and the value of its common stock.

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. As of June 30, 2019, the Company had an accumulated deficit of $543.2 million. During the six months ended June 30, 2019, the Company incurred a net loss of $19.9 million and used $25.5 million of cash in operating activities. The Company expects to continue to generate operating losses in the foreseeable future. The Company expects that its cash, cash equivalents and marketable securities of $39.9 million at June 30, 2019 will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from issuance of the financial statements. The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.

The Company expects that it would finance any future cash needs through a combination of divestitures of its product candidates or other assets, equity offerings and debt financings. There can be no assurance as to the timing, terms or consummation of any divestiture or financing, and the terms of any such financing may adversely affect the holdings or the rights of the Company’s stockholders or require the Company to relinquish rights to certain of its revenue streams or product candidates.

The accompanying condensed consolidated financial statements reflect the operations of Merrimack Pharmaceuticals, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.

The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The accompanying condensed consolidated financial statements reflect Merrimack Pharmaceuticals, Inc. and its wholly owned subsidiaries.

The condensed consolidated balance sheet as of December 31, 2018 was derived from audited financial statements, but does not include all disclosures required by GAAP. The condensed consolidated balance sheet as of June 30, 2019, the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2019 and 2018, the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2019 and 2018 and the condensed consolidated statements of cash flows for the six months ended June 30, 2019 and 2018 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of June 30, 2019, the results of its operations for the three and six months ended June 30, 2019 and 2018, its statements of stockholders’ equity for the three and six months ended June 30, 2019 and 2018 and its statements of cash flows for the six months ended June 30, 2019 and 2018. The financial data and other information disclosed in the notes related to the three and six months ended June 30, 2019 and 2018 are unaudited. The results for the three and six months ended June 30, 2019 and 2018 are not necessarily indicative of results to be expected for the year ending December 31, 2019, any other interim periods, or any future year or period.

The unaudited interim financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on March 6, 2019.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the statement of financial position that sum to the total of the same such amounts shown in the statement of cash flows:

Restricted cash on the statement of financial position for 2019 and 2018 primarily represents amounts pledged as collateral for operating lease obligations as contractually required.

The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates, assumptions and judgments reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expenses and the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.

Marketable debt securities consist of investments with original maturities greater than 90 days at their acquisition date. The Company classifies all of its marketable debt securities as available-for-sale securities. The Company’s marketable debt securities are measured and reported at fair value using quoted prices in active markets for similar securities. Unrealized gains and losses on available-for-sale securities are reported as accumulated other comprehensive loss, which is a separate component of stockholders’ equity. The cost of securities sold is determined on a specific identification basis, and realized gains and losses are included in other income and expenses, net in the consolidated statements of operations and comprehensive loss.

The Company evaluates its marketable debt securities with unrealized losses for other-than-temporary impairment. When assessing marketable debt securities for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the statement of operations and comprehensive loss. No such adjustments were necessary during the periods presented.

The Company adopted the new leasing standards on January 1, 2019, using the modified retrospective transition method, which does not require restatement of prior periods, for all the leases existing as of the adoption date. The adoption of the new leasing standards did not have a significant impact on the Company’s consolidated financial statements. As of January 1, 2019, the Company’s only existing lease is the lease of its principal research and office space located at One Kendall Square in Cambridge, Massachusetts, which expired in June 2019.

Fair value is an exit price, representing the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is determined based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect certain market assumptions. As a basis for considering such assumptions, GAAP establishes a three-tier value hierarchy, which prioritizes the inputs used to develop the assumptions and for measuring fair value as follows: Level 1 observable inputs such as quoted prices in active markets for identical assets; Level 2 inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3 unobservable inputs in which there is little or no market data, which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value.

The following tables show assets measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018:

	June 30, 2019
(in thousands)	Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	28,600	$	—	$	—
Totals	$	28,600	$	—	$	—

Marketable securities:
Commercial paper		—		2,987		—
Totals	$	—	$	2,987	$	—

	December 31, 2018
(in thousands)	Level 1		Level 2		Level 3
Cash equivalents:
Money market funds	$	16,292	$	—	$	—
Commercial paper		—		1,998		—
Totals	$	16,292	$	1,998	$	—

Marketable securities:
Commercial paper	$	—	$	31,766	$	—
Corporate debt securities		—		7,479		—
Government securities		—		11,954		—
Totals	$	—	$	51,199	$	—

During the six months ended June 30, 2019 and the year ended December 31, 2018, there were no transfers between Level 1 and Level 2. The fair value of Level 2 instruments classified as cash equivalents and marketable debt securities were determined through third-party pricing services.

The Company’s cash, restricted cash, prepaid expenses and other current assets, accounts payable and accrued expenses are recorded at cost, which approximates fair value due to their short-term nature

The following table summarizes the Company’s marketable securities and cash equivalents as of June 30, 2019 and December 31, 2018:

	June 30, 2019
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Cash equivalents:
Money market funds	$	28,600	$	—	$	—	$	28,600
Total cash equivalents	$	28,600	$	—	$	—	$	28,600

Marketable securities:
Commercial paper	$	2,987	$	—	$	—	$	2,987
Total marketable securities	$	2,987	$	—	$	—	$	2,987
Total cash equivalents and marketable securities	$	31,587	$	—	$	—	$	31,587

	December 31, 2018
(in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Cash equivalents:
Money market funds	$	16,292	$	—	$	—		$	16,292
Commercial paper		1,998		—		—			1,998
Total cash equivalents	$	18,290	$	—	$	—		$	18,290

Marketable securities:
Commercial paper	$	31,766	$	—	$	—		$	31,766
Corporate debt securities		7,487		—		(8	)		7,479
Government securities		11,955		—		(1	)		11,954
Total marketable securities	$	51,208	$	—	$	(9	)	$	51,199

Through April 15, 2019, the Company borrowed $15.0 million under the Loan Agreement by and among the Company, certain subsidiaries of the Company from time to time party thereto, the several banks and other financial institutions or entities from time to time parties thereto (collectively referred to as “Lender”) and Hercules, in its capacity as administrative agent and collateral agent for itself and Lender, and incurred $0.4 million of related debt discount and issuance costs, inclusive of the $0.3 million fee paid upon closing. Prior to the repayment of the debt, the debt discount and issuance costs were being accreted to the principal amount of debt and being amortized from the date of issuance through August 1, 2021 to interest expense using the effective-interest method.

On April 15, 2019, the Company repaid in full all principal, accrued and unpaid interest, fees, costs and expenses under the Loan Agreement in an aggregate amount equal to $16.0 million (the “Payoff Amount”). The Payoff Amount includes a prepayment penalty of $0.2 million and a fee of $0.8 million, which were recorded to interest expense. The loss on extinguishment of the debt of approximately $1.0 million was recorded as interest expense during the second quarter of 2019. The loss on extinguishment represents the difference between the reacquisition price of the debt and the net carrying amount of the extinguished debt. In connection with the payment of the Payoff Amount, all liens and security interests granted to secure the obligations under the Loan Agreement and all guaranties of the obligations under the Loan Agreement terminated.

During the three and six months ended June 30, 2019, the Company recognized $1.0 million and $1.5 million of interest expense related to the Loan Agreement, respectively. No interest expense was associated with the Loan Agreement for the three and six months ended June 30, 2018.

Accounts payable, accrued expenses and other as of June 30, 2019 and December 31, 2018 consisted of the following:

(in thousands)	June 30, 2019		December 31, 2018
Accounts payable	$	24	$	1,034
Accrued goods and services		694		2,082
Accrued clinical trial costs		1,354		1,683
Accrued drug purchase costs		371		4,245
Accrued payroll and related benefits		44		2,315
Accrued restructuring expenses		1,056		921
Income taxes payable		83		83
Deferred tax incentives		1,314		1,314
Total accounts payable, accrued expenses and other	$	4,940	$	13,677

The Company’s 2011 Stock Incentive Plan (the “2011 Plan”) is administered by the Company’s Board of Directors and permits the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards.

There were no options granted during the three and six months ended June 30, 2019. At June 30, 2019, there were 1.4 million shares remaining available for grant under the 2011 Plan.

The Company recognized stock-based compensation expense during the three and six months ended June 30, 2019 and 2018 as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Employee awards:
Research and development expense	$	40	$	280	$	223	$	614
General and administrative expense		447		500		858		930
Total stock-based compensation expense	$	487	$	780	$	1,081	$	1,544

Basic net loss per share is calculated by dividing the net loss attributable to Merrimack Pharmaceuticals, Inc. by the weighted-average number of common shares outstanding during the period.

Diluted net loss per share is computed by dividing the net loss attributable to Merrimack Pharmaceuticals, Inc. by the weighted-average number of dilutive common shares outstanding during the period. Dilutive shares outstanding is calculated by adding to the weighted shares outstanding any potential (unissued) shares of common stock from outstanding stock options based on the treasury stock method. In a period when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods where a loss is reported, there is no difference in basic and dilutive loss per share.

The Company follows the two-class method when computing net loss per share when it has issued shares that meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participating rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based on their respective rights to receive dividends, as if all income for the period has been distributed or losses to be allocated if they are contractually required to fund losses. There were no amounts allocated to participating securities for the three and six months ended June 30, 2019 and 2018, as the Company was in a loss position and had no shares that met the definition of participating securities outstanding as of June 30, 2019 and 2018.

Stock options are excluded from the calculation of diluted loss per share because the net loss for the three and six months ended June 30, 2018 causes such securities to be anti-dilutive. Outstanding options excluded from the calculation of diluted loss per share for the three and six months ended June 30, 2019 and 2018 are shown in the chart below:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	MACK	Nasdaq Global Market

		Page
Item 1.	Financial Statements.	2

	Condensed Consolidated Balance Sheets – June 30, 2019 and December 31, 2018 (unaudited)	2

	Condensed Consolidated Statements of Operations and Comprehensive Loss – Three and Six Months Ended June 30, 2019 and 2018 (unaudited)	3

	Condensed Consolidated Statements of Stockholders’ Equity – June 30, 2019 and June 30, 2018 (unaudited)	4

	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2019 and 2018 (unaudited)	5

	Notes to Condensed Consolidated Financial Statements (unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	22

Item 4.	Controls and Procedures.	22

Item 1A.	Risk Factors.	23

Item 5.	Other Information.	37

Item 6.	Exhibits.	38

Signatures		39

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☐

(in thousands)	June 30, 2019		June 30, 2018
Cash and cash equivalents	$	36,917	$	22,460
Restricted cash in prepaid expenses and other current assets		—		192
Restricted cash (short-term)		584		—
Restricted cash (long-term)		—		584
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statement of cash flows	$	37,501	$	23,236