MRSN - NASDAQ

Good morning, and welcome to Mersana Therapeutics Third Quarter 2022 Conference Call and webcast. Currently, all participants are in a listen-only mode. There will be a question answer session at the end of this call. I would now like to turn the call over to Jason Fredette, Senior Vice President, Investor Relations and Corporate Communications. Please proceed.

Good afternoon, everyone. Before we begin, please note that this call will contain forward-looking statements within the meaning of the federal securities laws. These statements may include, but are not limited to, those related to the therapeutic potential of our product candidates and the potential of our platform, business strategy, clinical trial, design initiation, execution and data releases, regulatory plans and objectives, commercial opportunities, collaborations and potential associated payments, operating expenses and cash runway. Each of these forward-looking statements is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. These risks and uncertainties are discussed in the company's quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 8, 2022 and in subsequent SEC filings. Our filings are available at sec.gov or on our website, mersana.com. Except as required by law, we assume no obligation to update forward-looking statements publicly even if new information becomes available in the future. With that, let me turn the call over to Anna Protopapas, our President and Chief Executive Officer.

Thank you, Jason. And hello, everyone. Welcome to our conference call. Joining me today with prepared remarks are our Chief Medical Officer, Arvin Yang and our Chief Financial Officer, Brian DeSchuytner. I'm also joined by certain other members of management, who will be available to answer our questions. We have continued to forward momentum here at Mersana with a number of significant accomplishments in recent months. Let's recap beginning with the progress we have made in executing a comprehensive development plan to address areas of unmet need across the ovarian cancer landscape with UPGRADE. We achieved a major milestone last month with the completion of enrollment in UPLIFT, our single arm registration trial in platinum-resistant ovarian cancer. We think it's noteworthy to point out that we were able to fully enrolled this trial within just one year. We attribute this to three primary factors. First and foremost is the significant unmet need faced by patients with platinum-resistant disease. Second is the high level of enthusiasm and engagement about a UpRi among investigators globally. And third is our team’s strong execution. With UPLIFT fully enrolled, we are positioned for what we expect to be a robust top line data readout in mid-2023. And assuming that data are positive and potential BLA submission by the end of next year. In addition to UPLIFT, we have commenced patient enrollment and dosing in UP-NEXT, our Phase 3 clinical trial of UpRi monotherapy maintenance in NaPi2b-positive recurrent platinum-sensitive ovarian cancer, which we believe could support approvals outside of the United States. And then there is an UPGRADE A, our Phase 1/2 clinical trial enrolling platinum-sensitive patients for treatment with a combination of UpRi and carboplatin. We are pleased to report that we are now nearing completion of the dose escalation portion of the trial. To date, 12 patients have been enrolled, a few of whom are still early in their treatment. Given the limited data set, we have opted against sharing data at this time, we expect to enter the dose expansion portion of UPGRADE A in the first quarter of 2023 and to present data that are more robust and mature in the second half of 2023. Beyond UpRi, we're excited to have begun our Phase 1 trial 1660, our [Inaudible] symptom product candidate, and we received Fast Track designation by the FDA for that candidate for the treatment of adult patients with advanced or metastatic triple negative breast cancer. Additionally, we recently opened our clinical sites and began screening activities for a Phase 1 trial of XMT-2056, our first Immunosynthen product candidate, patient dosing is expected to get underway later this quarter. In parallel with our clinical pipeline progress, we also have continued to focus on innovation in research, leveraging our three highly differentiated platforms as product engines to generate new molecules that have the potential to address important unmet medical needs. Our platforms provide substantial opportunities for expanding our pipeline, either with wholly owned assets, or through partnerships. The agreements we entered into, with Janssen in the first quarter, and GSK in the third quarter, demonstrate our position is an ADC innovator, and a partner of choice. And given the breadth of our assets, and the interest in the ADC space, we see collaborations remaining a core part of our go forward strategy. In summary, the Mersana team has made great strides across a number of key areas of focus, with an UPLIFT top line data readout and potential BLA submission on the near-term horizon, UP-NEXT and UPGRADE in motion, two exciting and highly differentiated new entities entering the clinic, and a balance sheet has been strengthened through significant collaborations. I am very proud of what we've achieved thus far in 2022. And we have a strong foundation in place as we head towards what we expect to be a transformative 2023. With that, I will ask Our Chief Medical Officer, Arvin Yang to delve more deeply into our clinical progress and plans.

Thank you, Anna. And good morning, everyone. Let's begin with our UpRi development plan and our three ongoing trials within the ovarian cancer landscape. First, there's UPLIFT, our registrational trial in platinum-resistant ovarian cancer. In September of 2021, we announced that we would be utilizing a dose of 36 mg per meter square of operate in this trial. And within just one year we enrolled approximately 270 patients in the trial exceeding our initial target. As a reminder, the design of UPLIFT provides us with two shots on goal. The first is the primary endpoint, which is the overall response rate, or ORR specifically in the NaPi2b-positive population. And the second is the ORR in the overall population. While the analysis of patient biopsies is ongoing, we have confirmed that our minimum targeted number of NaPi2b-positive patients for the primary endpoint has already been exceeded. Now let's turn to UP-NEXT, our ongoing Phase 3 trial and recurrent platinum-sensitive maintenance that is enrolling patients with NaPi2b-positive tumors and is designed to accomplish several important goals. First, it is intended to serve as the post approval confirmatory trial of operating in the US. Additionally, UP-NEXT is designed to support global registrations while also bringing UpRi into earlier lines of therapy. Since this trial was in the maintenance setting, where we are looking to keep patients on therapy to maintain disease control or remission for as long as possible. We're utilizing a 30 mg per meter squared dose of UpRi. We plan to enroll approximately 350 patients worldwide in UP-NEXT. These includes three types of patients who currently have limited treatment options. The first are those who progress on PARP inhibitors and Bevacizumab, whether taken in combination or in sequence. As these agents move to the earlier lines of therapy, it increases the number of patients that already exhausted dose options. Second, our patients who are poorly served by today's maintenance agents, either because of biomarker status or tolerability issues, and are resorting to watch and wait as their best option. And finally, there are the patients who achieve stable disease on platinum who were excluded from PARP maintenance studies and consequently are excluded from PARP inhibitor. Now let's move on to 1660 and 2056, XMT-1660 is a Dolasynthen product candidate that targets B7-H4 and is equipped with a precise target optimized drug to antibody ratio of six and are clinically validated DolaLock payload with controlled bystander effect. In August, we initiated a multicenter Phase 1 trial investigating this candidate in patients with breast endometrial and ovarian cancers, we see B7-H4 as a compelling target given its high tumor expression in these indication and the limited expression in healthy tissue, the initial dose escalation portion of the trial will evaluate the safety and tolerability of 1660 as a single agent, and will be followed by dose expansion portion in which we'll assess objective response rate, duration of response and other measures. And the next candidate we'll be entering the clinic is XMT-2056, a HER2 directed Immunosynthen STING agonist, ADC. As you may recall, 2056 targets a novel HER2 epitope and is designed to locally activate sting signaling in both tumor residents, immune cells and in tumor cells. preclinical data have shown its potential to have a significant impact on HER2 high and low tumors, both as a monotherapy or in combination with standard of care agents such as HER2, we expect to begin patient enrollment and dosing and our multicenter Phase 1open label trial later this quarter, this trial will investigate 2056 in patients with previously treated advanced or recurrent solid tumors expressing HER2, such as breast, gastric, colorectal and non-small cell lung cancer. The initial dose escalation portion of the trial will investigate the safety and tolerability of 2056 and will utilize the data to determine the recommended Phase 2 dose and or a maximum tolerated dose. The dose extension portion of the trial will continue to assess safety and tolerability as well as the ORR, duration of response and disease control rate. And so, we've made significant progress across our entire pipeline, and will soon have molecules from all three of our ADC platforms in the clinic. And our focus from there on will be on patient enrollment and data generation. So with that, let's turn the call over to our Chief Financial Officer, Brian DeSchuytner. Brian?

Thank you, Arvin. We ended the quarter with $290 million in cash, cash equivalents and marketable securities. Additionally, our line of credit with Oxford and SVB provides us with the opportunity to draw down an additional $35 million in low-cost capital at our option. We believe we currently have the funds required to support our operating plan commitments into the first half of 2024. It should be noted that potential milestones from our current collaborations, or proceeds that we may realize from future collaboration could extend this runway even further. We continue to play strong emphasis on business development, and view it as an important tool within our financing arsenal. The collaborations we enter into recently with the Janssen and GSK are prime examples of how we can leverage our differentiated platforms and candidates and expand their reach while raising meaningful upfront capital. Given our past successes and the ongoing surge of interests we are seeing in the ADC space, we see the potential for further business development initiatives in the quarters to come. Now let's move on to our P&L for the third quarter. Collaboration revenue for the third quarter of 2022 was $5.6 million, compared to an immaterial amount for the same period in 2021. The year-over-year increase was related to the revenue recognized under our collaboration agreement with Janssen and GSK. Research and Development expenses for the third quarter of 2022 were $50.6 million, compared to $35.3 million for the same period in 2021. Non-cash R&D related stock-based compensation expense for the third quarter of 2022 was $2.9 million. Most of the year-over-year increase in R&D was driven by non-recurring costs related to UpRi antibody manufacturing process qualification lab in preparation for a potential BLA submission, which we had guided on our Q2 conference call. These costs are now largely behind us. Other drivers of the R&D increase included higher clinical costs for UpRi and XMT-1660, greater costs related to manufacturing for XMT-2056 and increased headcount. General and Administrative expenses for the third quarter of 2022 were $14.6 million, compared to $10.1 million for the same period in 2021. Non -cash G&A related stock-based compensation expense for the third quarter of 2022 was $2.5 million. The year-over-year increase in G&A was primarily related to an increase in consulting and professional fees and increased headcount. Mersana’s net loss for the third quarter of 2022 was $59.8 million, or $0.61 per share, compared to a net loss of $45.5 million, or $0.63 per share for the same period in 2021. And finally, net cash provided by operating activities was approximately $54.6 million for the third quarter of 2022. As a reminder, this includes GSK’s $100 million upfront license option payment. Now Anna will close our formal remarks before we take your questions. Anna?

Thanks Brian and Arvin. This already has been a very productive year. We've completed enrollment in UPLIFT, we initiated our UP-NEXT and XMT-1660 clinical trials, we're bringing 2056 into the clinic, and we entered into two significant new partnerships. This positions us for what we expect to be a transformative 2023 highlighted by top line data readout from UPLIFT and our first potential BLA submission. Before we turn the call over to Q&A, I would like to extend a hearty thank you to all of our employees for their stellar work, while also extending our thanks to the patients in our trials and their families. And I would like to commend the clinical investigators we are working with, in UPLIFT, UP-NEXT and UPGRADE for their relentless patient advocacy and support as we aim to provide a much-needed new ovarian cancer treatment option. With that, let's open the call to questions. Operator, would you please provide the instructions?

[Operator Instructions] Jonathan Chang with SVB Securities.

Good morning, and thanks for taking my questions. First question on the UPLIFT study. The press release indicates that the minimum target number of NaPi2b-positive patients has already been exceeded. And I'm trying to understand what this means. Is it a function of strong enrollment in the study overall, and or other factors we should be considering? And are able to tell us how many patients have had evaluable patients’ biopsies at this point? Thank you.

So, Jonathan, thanks for the question. The NaPi2b scores of evaluations are still ongoing. And therefore, we do not have the full number of NaPi2b high patients yet. But we wanted to confirm that minimum 100 we were targeting we have already achieved and exceeded as you would expect from the overall prevalence of NaPi2b high we've seen to date.

Understood. Thank you. Anna, I'm sorry, go ahead.

Was there a second part to your question, Jonathan?

Yes, so the second question on the UPGRADE study, are you able to provide any color around how safety has looked in the limited number of patients today?

As we mentioned on the call, we've enrolled 12 patients, a handful of them are still not yet the value above. But based on what we've seen to date, we are planning to initiate the expansion cohorts in Q1 of next year. And we do or we're very encouraged with combine ability and the potential benefit of this combination. However, we do need to get more, a more robust and mature data set and at that point, we'll be able to disclose the data externally.

Colleen Kusy with Baird.

Hi, great. Thanks. Good morning, and thanks for taking your questions. And congrats on completing the enrollment in the UPLIFT trial. Can you remind us what the bar for success is that you're looking for in the UPLIFT trial? And do you think will that be solely based on ORR or do you think duration of response or PSS will have any impact on your potential to get accelerated approval?

Good morning, Colleen, this is Arvin. So on the bar for success, as discussed with FDA is single agent chemotherapy with a maximum response rate of 12%. And as you know, these patients really have significant unmet need in this space. And so the regulatory review will be based upon both the risk and the benefit, and the ORR and certainly the response rate or the merit number by which the comparison would occur. But again, you would need to have the broader context of the safety profile as well as additional parameters to understand the duration of the benefit in order to do that risk benefit analysis.

Okay, great. That's helpful. Thank you and for the UPGRADE study, can you speak to what dose levels you've escalated to? And how many more dose levels you plan to explore before starting expansion?

Yes, Colleen, we've evaluated multiple dose levels. I think we're going to hold off for details until we have done more robust and mature data set, but we have explored multiple data dose levels. And as we, as I've said, we will be initiating the expansion cohort in Q1.

Great, thank you. And one last one, if I can for that for the ongoing 1660 study. Can you speak to what your biomarkers strategy will be there?

Sure, Colleen, just to give you context, we are obviously evaluating B7-H4 in the study per se, but we are enrolling from all comers and disease types that have higher expression in relationship to the B7-H4 based upon what's in the public databases. And so obviously, we'll be pursuing and trying to understand if there are enrichment biomarkers that can serve to enhance upon that therapeutic index.

We're following very much the playbook we followed for UpRi where we did not select upfront, but learned through the early Phase 1, what the best enrichment strategy was.

Kaveri Pohlman with BTIG.

Good morning. Thanks for the update, for the UP-NEXT trial, can you talk about your rationale for selecting lower doses of 30 mg per m squared? Is it something based on the data from the pivotal UPLIFT study?

Yes, thanks for the call, Kaveri. And so we chose 30 mg meter squared for the UP-NEXT study in particular to continue to identify a dose that could control the disease, which is most relevant in that platinum-sensitive maintenance, or recurrent setting. This is as opposed to really the platinum- resistance space where a treatment effect with a 36 milligram is the intent and the goal in order to shrink the tumor. And so, we believe that we have the ability to then optimize the dose regimen in relationship to the disease space.

That's very helpful. Thank you. And then my second, sorry, go ahead.

I think you also asked on what based on what data and I think the answer is based on the holistic data of all the patients we have treated today, dose escalation, dose expansion, and of course UPLIFT as well.

That’s helpful. And the second question is also for UP-NEXT study, can you tell us what drove your interest in specifically targeting NaPi2b high patients. I mean, if you get activity in NaPi2b low patients from the UPLIFT trial, will you be able to? And do you plan to amend the protocol to include those patients?

So let me start with, from the standpoint that NaPi2b is highly expressed within ovarian cancer. And so from the datasets that we've described, it appears to be consistently expressed in the earlier line and in the late line setting. And so when we think about that target product profile for the maintenance setting, we want to ensure that we have the most optimized profile in relationship to that. And based upon the datasets that we've seen to date; it really indicates that NaPi2b could serve as an enrichment marker in relationship to just optimizing that risk for efficacy that seen. And so that's the rationale in relationship to selecting for NaPi2b patients in the UP-NEXT study, and we cannot comment really just in regards to what changes would occur or if they would occur in relationship to these upon us, leave that this time.

David Nierengarten with Wedbush.’

Thanks for taking the question. I was just wondering if you'd seen any uptick in enrollment for the UP-NEXT, given the situation with PARP in the space? And if there's any upside to timing for full enrollment of that study next?

So let me start with and so first off just in relationship to enrollment, the investigators continue to be extremely excited just in relationship to additional options within the space. And so in the platinum-sensitive recurrent space, there continues to be a significant unmet need. And this is really furthered by from the standpoint of a couple of different things. One is that obviously the available therapies can only serve a proportion of those patients. But then two is that, David, I'll go into detail slightly about our patient population. So we enroll patients that have obviously already received and potentially progressed on available agents including Bevacizumab and PARP inhibitors, but two, is that actually we do not require patients to have received the PARP jab unless they are [Inaudible] because of again, that differential benefit that's seen in molecular subtypes that seem to identify though that could maximally benefit from PARP inhibitors. And then third is actually that population that only achieved stable diseases as a best response to that prior chemotherapy induction. And there, there's actually nothing approved for those patients. And so to that end, we're able to potentially fulfill an unmet need within that space. And so given all of this, we do see extreme excitement in relationship to the investigators and an interest in participating in the study.

Boris Peaker with Cowen.

My first question is on an UPLIFT study. You mentioned there are obviously two primary endpoints, there's an ORR and NaPi2b high patients, which you mentioned, completed and met the minimum target of enrollment. And then there's ORR and all comers. Can you discuss how the trial may be viewed by the FDA, if there's significant difference between those two ORR numbers, one is higher than the other or the other way around.

Yes, thank you, Boris. I can start to respond. And so obviously, in order to support a positive risk versus benefit in the all comers, it will really have to be identified that there is sufficient benefit in both the high NaPi2b as well as the low NaPi2b population. But again, keeping in mind that one of the goals would be to ensure that you don't leave any patients behind. Right. And so, if there is sufficient benefit within those populations that could then support a broad indication of the all comers, again, still supported by the potential for a complimentary diagnostic to further identify those patients that could have potentially greater benefits.

Got it. And can you comment broadly say commercially, how many patients would be targeted if it only supports in NaPi2b high versus all comers.

So we have two data sets, we have disclosed that really talks about the prevalence of NaPi2b high. The first one is the expansion cohort, where 64% of patients were determined to be NaPi2b high. The second one is a data set disclosed by our diagnostic partner, Lyka where they looked at 398 tissue samples, unique tissue samples from patients and found the prevalence to be 59%. So the prevalence of NaPi2b high is substantial. And we believe we could benefit a substantial portion of the platinum-resistant ovarian cancer population whether we just win on the NaPi2b high or of course on the total population.

I will now turn the call back over to CEO, Anna Protopapas for closing comments.

Thank you, operator and thanks to all of you who tuned in for our continued support. We hope everyone enjoys the upcoming holidays, and we look forward to keeping you updated on our progress.