MRSN - NASDAQ

Good morning, and welcome to Mersana Therapeutics Fourth Quarter and Year End 2024 Conference Call. Currently all participants are in a listen-only mode. There will be a question-and-answer session at the end of this call. [Operator Instructions] I would now like to turn the conference over to Jason Fredette, Senior Vice President, Investor Relations and Corporate Communications. Please proceed.

Thank you, operator, and good morning, everyone. Before we begin, please note that this call will contain forward-looking statements within the meaning of Federal Securities Laws. These statements may include, but are not limited to, those related to the potential clinical benefits of our product candidates and platforms, our clinical trial progress and designs, dosing and patient management strategies, addressable market opportunities, anticipated milestones and data disclosures and cash runway. Each of these forward-looking statements are 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 our quarterly report on Form 10-Q filed with the Securities and Exchange Commission on November 13, 2024, and in subsequent SEC filings. Our filings are available at sec.gov and 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. On today's call, we have Mersana's Chief Executive Officer, Dr. Martin Huber; and our Chief Operating Officer and Chief Financial Officer, Brian DeSchuytner. With that, let me turn the call over to Marty to begin the discussion.

Thank you, Jason, and good morning, everyone. Over the past several months, we have accomplished a great deal here at Mersana, most notably with our lead Dolasynthen ADC, Emi-Le, we reported positive initial clinical data, started the expansion portion of our Phase I trial and were granted an additional Fast Track designation for a growing portion of the breast cancer population that has previously been treated with a topoisomerase-1 inhibitor, or topo-1 ADC. At the same time, we advanced Phase I dose escalation with XMT-2056, our lead Immunosynthen ADC, while also supporting our collaborators. Let's focus first on Emi-Le, Mersana's ADC targeting B7-H4. In January, we reported initial clinical data from 130 patients who are enrolled in dose escalation and backfill cohorts, as of December 13, 2024 data cutoff. From a safety and tolerability standpoint, Emi-Le was observed to be highly differentiated within the ADC space. The most common treatment-related adverse events of any grade were transient increases in AST, generally asymptomatic and reversible proteinuria, generally low-grade nausea and low-grade fatigue. Importantly, unlike many other ADCs, we did not see dose-limiting neutropenia, neuropathy, ocular toxicity, interstitial lung disease or thrombocytopenia. This provides us with the confidence that Emi-Le could have an attractive monotherapy profile. Just as importantly, we believe it also could enable combinations with standards-of-care like platinum chemotherapy and other ADCs that our competitors would be challenged to pursue. From a clinical activity standpoint, confirmed objective responses were observed in all enrolled tumor types. These included patients with triple negative and hormone receptor positive breast cancer, endometrial cancer, ovarian cancer and adenoid cystic carcinoma type 1, otherwise known as ACC-1. At intermediate doses, which range from about 38 to 67 milligrams per meter squared or about 1 milligrams to 2 milligrams per kilogram, the confirmed objective response rate was 23% across all tumor types with high B7-H4 expression, which we define as an IHC score of 70% or more. Focusing specifically on the evaluable patients in this dose range with B7-H4 high triple negative breast cancer, the confirmed ORR was also 23%. At the end of 2024, we initiated the expansion portion of our trial in patients with TNBC, who have previously been treated with at least one topo-1 ADC, a population with a very high unmet need. We believe we are positioned for success for a few key reasons. The first is the dose we are utilizing. The second is our inclusion criteria. Third is the standard-of-care for these patients today. And the final factor is the competitive environment in which we are operating. Let's begin with the dose. Generally speaking, as you might expect, we have seen that clinical activity tends to increase along with Emi-Le's dose. As I mentioned, the 23% ORR, we observed was generated across a range of doses from about 38 milligrams to 67 milligrams per meter square. We have brought the top dose from this range, specifically 67.4 milligrams per meter squared every four weeks into expansion. As we previously reported, this particular dose was well tolerated. Additionally, each of the four B7-H4 high patients who received this dose achieved target lesion reductions and each also remained on treatment for durations of approximately 16 weeks or more as of the data cutoff. A second factor that can influence response is prior treatment. This is well-established in oncology and specifically in triple-negative breast cancer. As a reminder, the 23% ORR that we observed with Emi-Le and TNBC was generated in a population of 13 evaluable patients, 12 of these patients received more than three lines of prior therapy, and all had received at least one topo-1 ADC. These data compare favorably to historical benchmarks. For instance, a 23% ORR was also seen with Trodelvy and TNBC patients who received more than three prior lines of therapy in the Phase III ASCENT study. But of course, this was in a TOPO naive setting. Trodelvy's ORR increased to nearly 40% in patients who received only two or three prior-lines of therapy. In expansion, we are limiting enrollment to patients with a maximum of four prior lines, while also mandating that at least 1 prior treatment must have been a topo-1 ADC. It is also important to keep in mind what the standard-of-care is in TNBC today. In ASCENT, the control arm which was single agent chemo, had an ORR of only about 5%. And finally, there is the competitive environment. We view recent developments within the B7-H4 ADC landscape as favorable for Emi-Le. Most notably, the company that we have viewed as our primary would-be competitor within the breast cancer space, Pfizer recently announced that at a discontinued development of its B7-H4 ADC candidate. The other B7-H4 ADCs that are at a similar stage of clinical development as us all have topo-1 payloads. As a result, unlike Emi-Le, we believe they are subject to topo-1 resistance mechanisms. In fact, some of these companies appear to be excluding patients who have received prior topo-1 therapies from their clinical trials. This positions Emi-Le, as the most advanced or statin ADC in the class, which provides us with a significant opportunity in breast cancer. We are pleased with the level of investigator interest and engagement we are seeing. And while TNBC is our immediate focus, given the clinical activity we have seen across all tumor types, we are excited by Emi-Le's potential in other indications as well. And so enrollment continues at our initial expansion dose of 67.4 milligrams per meter squared. We also continue to investigate doses up to 95 milligrams per meter squared in escalation of backfill cohorts, delays, we are pleased to report that we officially amended our clinical trial protocol in late January, as we seek to mitigate the proteinuria related dose that we were seeing at high doses. We expect these efforts will help us identify a second dose for our second expansion cohort in post topo-1 TNBC later this year, and we plan to present additional data from dose escalation of backfill later this year as well. Moving on to other areas. We also have advanced the dose escalation portion of our Phase I clinical trial of XMT-2056 in recent months. 2056 is our Immunosynthen STING agonist ADC targeting a novel epitope or HER2. Later in 2025, we plan to present initial pharmacodynamic data from this clinical trial that helps to characterize this candidate's ability to selectively activate the STING pathway in HER2 expressing tumors. And finally, I would like to note that we continue to make solid progress in our Dolasynthen research collaboration with J&J, and our Immunosynthen Research collaboration with Merck KGaA. With that, let's turn things over to Brian for some color on our financials.

Thank you, Marty. Beginning with our balance sheet. We ended 2024 with $134.6 million in cash, cash equivalents and marketable securities. We continue to expect that our capital resources will support our current operating plan commitments into 2026. Please note that our cash runway guidance does not assume any future milestone payments that we may earn from our current collaborations or proceeds that we may realize from future collaborations. Net cash used in operating activities for the fourth quarter of 2024 was $19.3 million, which is down significantly from $32 million in net cash used in operating activities during the year ago quarter. This decrease primarily reflects our portfolio reprioritization efforts, including the OpEx reductions we implemented in the second half of 2023, as part of our restructuring. Turning to our income statement. Collaboration revenue for the fourth quarter of 2024 was $16.4 million compared to $10.7 million for the same period in 2023. The year-over-year change was primarily related to increased collaboration revenue recognized under our agreements with J&J, Merck KGaA and GSK. Research and development expenses for the fourth quarter of 2024 were $22.3 million compared to $21.5 million for the same period in 2023. For the most recent quarter, approximately $1.7 million of this spending was related to non-cash stock-based compensation. The year-over-year change was primarily related to increased costs associated with manufacturing and clinical development activities for Emi-Le and XMT-2056, which were partially offset by reduced costs related to clinical development activities for our discontinued candidate, UpRi. General and administrative expenses for the fourth quarter of 2024 declined to $8.9 million compared to $10.1 million during the same period in 2023. Approximately $1.7 million in non-cash stock-based compensation expenses were included in G&A for the most recent quarter. The year-over-year decline was primarily related to reduced employee compensation expenses following our restructuring in 2023 and reduced consulting and professional services fees. And finally, Mersana's net loss for the fourth quarter of 2024 was $14.1 million compared to a net loss of $19.5 million for the same period in 2023. That concludes our business update. Operator, would you please open the call to questions from the audience.

We will now begin the question-and-answer session. [Operator Instructions] The first question today comes from Jonathan Chang with Leerink Partners. Please go ahead.

Hi. This is Yen-Der Li on for Jonathan Chang. Thanks for taking my question. So the first question I have is that, could you share the latest progress on how you are mitigating the AST, ALT elevation and proteinuria issue related to Emi-Le? And how do you think that might increase your confidence in maintaining the dose intensity at a higher dose level? Thank you.

Thank you for the question. I'll start with the AST then go into proteinuria and then get your last question. So with regards to AST, AST does not result in meaningful amounts of dose delays. And even if a patient does have a delay, it's only about a week. So at this point in time, AST is a transient reversible phenomena that is not having a meaningful impact on our ability to deliver dose. With regards to proteinuria, just to reiterate, that is primarily a challenge or leading to dose delays only at the highest dose range. So what we are currently doing is, as we mentioned, we've had an amendment to the protocol, which does several things. One, it puts in place mitigations such as ACE inhibitors, ARBs early in a kind of a prophylactic manner to minimize the development of proteinuria. But importantly, as in the setting of when proteinuria does occur but it is asymptomatic in that a patient is not having edema, they're not having any serum hypoalbuminemia or serum [indiscernible] changes. For those patients, we are able to maintain dosing by doing a dose reduction as opposed to a dose delay. So we are -- we look forward to testing that in the clinic to show that we are able to maintain dose intensity. The clinical outcome will -- I mean we are doing the experiment now.

Got it. And just a quick follow-up on the proteinuria. I think on the separate code, you did mention that it was related to [podocytopathy] (ph). And do you think that's caused by B7-H4 on-target or off-target effect? Just curious about the mechanism. Thank you.

At this point in time, we believe it is off target. Other [indiscernible] payloads that are not for B7-H4 have been observed to have albuminuria of this same type of podocyte effect.

Got it. Thanks for taking my question.

The next question comes from Charles

Hi. Good morning, everyone. Thanks for taking our questions for the call and hope everyone had a great weekend. Regarding your dose expansion criteria of having patients with 1 to 4 prior lines of therapy, what's your sense of the distribution of patients that you might be getting that have fewer, call it, 1 to 2 as opposed to more, call it, 3 to 4 prior lines of therapy? Thank you.

I think it's too early to get that read. I mean we opened it in the study and we're still gathering data. So I think it would be premature for me to give guidance on what we think are the lines that are actually going to be in the population. One thing we can clearly say is per inclusion, exclusion criteria, those patients who had previously been on with 5, 6 or 7 are excluded from expansion. So at a minimum, it will ensure that patients don't have more than 4 prior lines. That is part of the protocol.

Got it. Thank you for that. Great. Maybe one quick follow-up right now. I guess then I think you went through this a little bit as well, but to what extent will your second dose, your second go-forward dose, the identification of that be dependent on your ability to mitigate proteinuria? So you've already selected 67.3 in the intermediate range and is there a scenario where you go for something, let's call it, in the middle to the higher end of your high dose range if your proteinuria mitigation works very well? Or is there an alternative scenario where you could end up maybe selecting even a separate dose beyond that? Thank you.

At this point in time, we are setting doses up to 95 milligrams per meter squared. So we are not exploring anything higher than that at this point in time.

Got it. Thank you for taking the questions.

[Operator Instructions] The next question comes from Michael Schmidt with Guggenheim. Please go ahead.

Hi, good morning. Thanks for taking our questions. This is Paul on for Michael. I wanted to expand a bit on how you are currently thinking about establishing the final biomarker cutoff? Is it reasonable to expect where you land on TPS score to still capture roughly half of the TNBC population? Or could there still be a meaningful swing factor in how you are thinking about B7-H4 high?

Yes. I think while we continue to explore it, I would be surprised if it's outside of that 40% plus or minus, [40% to 50%] (ph) at the upper limit is most likely where we'll end up. It would be -- to me, it would be very surprising if we end up with more than 50% or substantially less than 40%. And with the -- I'm sorry, for a proportion of the population, the TPS score could be -- that's TBD with the actual percent TPS, tumor proportion score number is.

Got it. And then just as a follow-up, just can you set some expectations for the updated Phase I dose escalation and backfill data later this year, which dose levels are in focus for enrollment? How many additional patients of data can we potentially see? And what's the sort of gating factor for when you'll be ready to provide that update? Thank you.

Yes. This is Jason. We haven't defined that. What we've said is we plan to present additional escalation in backfill data later on this year, as Marty alluded to. We are looking at doses up to 95 mgs per meter squared, but we haven't defined how much incremental data would be in that readout.

The next question comes from Andy Hsieh with William Blair. Please go ahead.

Great. Thanks for taking our question. Just one quick one for us. Just looking at the updated deck, I think the only thing that changes the competitive landscape, Marty, I think you mentioned a little bit in your prepared remarks about the evolving competitive landscape. But I'm curious if you can kind of dive in deeper about some of the competitors that went to Phase III, dropped out. Just hoping to hear a little bit more from you. Thank you.

I'm going to let Brian give you a more detailed answer on that one.

Yes. As Marty articulated, we believe that Emi-Le is very well positioned in the B7-H4 space. As you noted with the departure of one of our competitors, we are the most advanced auristatin B7-H4 in development. We're the only company that has shared initial positive efficacy data, that of course, TOPO breast cancer setting. As you remarked, one competitor is moving into pivotal studies in a gynecologic tumor. I think we feel like this is very encouraging because it's additional validation that you can see meaningful activity on that target. But several TOPO competitors very much focused on ovarian and endometrial at this stage. So we believe, one in Emi-Le potential as monotherapy. We also believe that our safety and tolerability profile may afford us an opportunity to combine with things like platinum chemo and other ADCs. And we think long-term, as a set of development opportunities, some of our competitors might be very challenged to pursue those combinations. And so I think, as we look at the overall competitive landscape, we view it very favorably.

The next question comes from Asthika Goonewardene with Truist. Please go ahead.

Hi, good morning guys. Thanks for taking my questions. Two quick ones, if I may. Could you give us a little bit of clarity on when we could expect some of the expansion cohort data up to 6 to 7 mgs? And then when you presented data earlier this year, we've looked at 3 different intervals, the Q3 to Q4 and then a two-on two-off. I'm curious if you're looking at other intervals, maybe like a [three-on one-off ] (ph) or any other types of other formats as well, just to kind of set to the collection on the dosing. Thank you.

This is Marty. I'll answer the second one first. At this point in time, we are not studying any schedules beyond what we previously shared. We are continuing to explore different schedules at this point in time, but they are limited to the three we've already shared. And with regards to expansion, we are not giving any further details on timing of expansion other than to say that we are continuing to enroll patients and investigators remain enthusiastic about the study.

The next question comes from Colleen Kusy with Baird. Please go ahead.

Hi, all. This is Nick on for Colleen. Thanks for taking our question. So for XMT-2056, just wanted to ask what you have to show on the PD update? And if there is a ballpark on how many patients or how much follow-up you might have? And if we can might see any early efficacy data at that time as well? Thanks.

We are not going into any detail beyond the fact that our primary objective will be to share pharmacodynamic data showing that we are getting activation of the same pathway in HER2-positive tumors. As far as any other details, we are not sharing at this point in time.

[Operator Instructions] The next question comes from Justin

Great. Thanks for taking the question. This is [Jed] (ph) on for Justin. I believe you had said you're going up to 95 mg per meter squared, but I do believe there was a 115 mg dose. Was there any reason why 115 mg isn't being explored further? And will we see a meaningful number of patients with proteinuria mitigation as part of this year's update?

Well, I think -- well, first of all, we are not studying 115 any further. At the 115 dose, we did observe the -- we saw it was reversible, but we did see Grade 3 AST in two of the three patients. And while we could have potentially explore that further, we made the decision that we were not going to -- because we were hitting the exposures, we were targeting at 95% and below. So our focus has been a cap of the 95 every four weeks or the variations of that.

And on the second question, in terms of, again the additional escalation in backfill data, what we'll show is somewhat time dependent, right, in terms of when we plan to share data. So we are not providing any additional specifics at this stage.

Got it. And maybe a follow-up. With the Pfizer program now discontinued, have you spoken to any KOLs who have been on both the Pfizer study as well as yours? And if so, how do they compare the two agents so far? Thank you.

Well, they are not going to give us details of confidential data from Pfizer. I think the main thing has been, at this point in time, we had already heard from the investigators and the KOLs that Pfizer was not going to pursue their B7-H4 and TNBC post-TOPO. That was known even before they discontinued the program overall. And so we were being approached by investigators to participate in our study because they have -- when they basically heard through the grapevine, to be frank, even before our data was disclosed, because we meet with these investigators, we have them under CDAs, they looked at our data as a promising opportunity in TNBC post-TOPO. And to be frank, it was the only game in town for their patients. So that's why we had several of those sites actively decided to join our study. As far as the actual data that Pfizer has in this population, they did not share that with this other than -- once again, other than the state that Pfizer was not pursuing this indication.

This concludes our question-and-answer session. I would like to turn the conference back over to CEO, Dr. Marty Huber, for any closing remarks.

Thank you, operator and thanks, everyone, for dialing in. We look forward to seeing many of you at the TD Cowen Healthcare Conference here in Boston tomorrow as well as at Leerink's Healthcare Conference in Miami next week. That concludes our call, operator. Thank you.