MRSN - NASDAQ

Good morning, and welcome to Mersana Therapeutics Second Quarter 2025 Financial Results and Business Update Conference Call and Webcast. [Operator Instructions] Please note, this call is being recorded. I would now like to turn the call over to Jason Fredette, Senior Vice President, Investor Relations and Corporate Communications.

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 design, addressable market opportunities and anticipated clinical milestones and data presentations 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 our quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2025, 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. Marty 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. The second quarter of 2025 was eventful for Mersana, particularly as it relates to Emi-Le, our Dolasynthen ADC targeting B7-H4. Chief among the highlights were our oral presentations at ASCO 2025 and ESMO Breast Cancer 2025 and the strong enrollment progress we made in our expansion cohorts. At ASCO in Chicago, Dr. Erika Hamilton of the Sarah Cannon Research Institute presented data as of March 8 data cutoff across all patients who are enrolled in our Emi- Le Phase I dose escalation and backfill cohorts. Safety and tolerability remained consistent with previously reported data. This presentation also included clinical activity data across all enrolled B7-H4 expressing tumors. At intermediate doses ranging from about 38 milligrams per meter squared to 67 milligrams per meter squared, the confirmed objective response rate, or ORR, was 31% among evaluable patients with B7-H4 high tumor expression, which we initially defined as a tumor proportion score of 70% or higher. The presentation also highlighted some intriguing activity that we have seen in adenoid cystic carcinoma type 1 or ACC1. This is a rare head and neck cancer with a very poor prognosis and no approved therapies. In the past, other development candidates such as VEGF TKIs and NOTCH inhibitors have investigated this tumor type and have shown response rates ranging from the mid-single digits to the mid-teens. Among the 9 evaluable patients with ACC1 who received any dose of Emi-Le regardless of B7-H4 expression, we observed 4 confirmed responses and one unconfirmed objective response. And subsequent to the March 8 cutoff, that one uPR was confirmed for an objective response rate in ACC1 of 56%. In recent months, we have enrolled additional patients with ACC1 and backfill cohorts. While these data help to demonstrate Emi-Le's broader development potential, our focus today is on addressing the significant unmet needs of patients with triple-negative breast cancer or TNBC, who have previously been treated with a topoisomerase 1 inhibitor or topo-1 ADC such as Trodelvy, ENHERTU or Datroway. The standard of care today for these patients is single-agent chemotherapy. And unfortunately, their expected outcomes are exceedingly poor. Based on reported data from the original ASCENT Phase III trial of Trodelvy in topo-naive patients with recurrent metastatic TNBC, the objective response rate or ORR for single-agent chemotherapy was 5%. Progression-free survival, or PFS, was 1.7 months and overall survival or OS was 6.7 months. At the ESMO Breast Cancer Congress in Munich, Germany, Dr. Hamilton presented data as of that same March 8 cutoff from patients with TNBC who had received intermediate doses of Emily, highlighting patients who had received 1 to 4 prior lines of treatment. Nearly all of these patients also had received at least 1 previous topo-1 ADC. Among the patients with B7-H4 low TNBC who received an intermediate dose of Emi-Le, observed clinical activity resembled today's standard of care with an ORR of 0, a median PFS of 6.4 weeks and a median OS of 5.7 months. But among those patients, we have initially characterized as B7-H4 high TNBC who received an intermediate dose of Emi-Le, the ORR was 29%, the median PFS was 16 weeks and the median OS had not yet been reached as of the data cutoff. It's data like these that led us to initiate dose expansion. And in recent months, we have continued to make progress in this phase of development. In expansion, we are enrolling patients with TNBC who have received 1 to 4 prior lines of treatment in the metastatic setting, including at least 1 prior topo-1 ADC. We're investigating 2 Emi-Le dosing regimens. Our dose A cohort is receiving a 67.4 milligram per meter square dose of Emi-Le every 4 weeks. And our dose B cohort is receiving 80 milligrams per meter square dose of Emi-Le every 4 weeks following a loading dose of 44.5 milligrams per meter squared on days 1 and 8 of the first 4-week cycle. Collectively, we have enrolled more than 45 patients across these 2 cohorts, and we remain on track to report initial clinical data from expansion in the second half of 2025. Now finally, on the Emi-Le front, we are often asked how big the post-topo-1 TNBC opportunity is. We believe it is sizable, and it has the potential to get substantially larger. As a reminder, today, topo-1 ADCs with TNBC indications are only approved in the recurrent setting. Despite this, Trodelvy is already expected to generate about $1 billion in global TNBC revenues in 2025. Of course, this figure does not include revenues that other topo-1 ADCs are generating in this setting, nor does it consider how the opportunity would increase as these agents move into early lines of therapy. For example, we believe the recent positive readouts of ASCENT-3 and ASCENT-4 will make Trodelvy the new frontline standard of care for patients with TNBC, which will greatly increase the post- topo-1 population of patients. As a reminder, emerging clinical data suggests that once a patient receives an initial topo-1 ADC, a subsequent topo-1 agent has substantially reduced benefit due to payload resistance. We believe this evolving treatment landscape opens the opportunity for a novel non-topo-1 agent like Emi-Le to address the growing unmet need for topo experienced patients if it is approved. So if a patient receives Trodelvy in the front line, Emi-Le could potentially be used as a second-line therapy or if a patient receives another topo-1 ADC such as ENHERTU, Dato-DXd or Sac-TMT in the recurrent setting, Emi-Le could potentially be used subsequent to that. Additionally, because of Emi-Le's differentiated tolerability profile, we believe it could potentially be explored in combinations with other agents, including topo-1 ADCs, platinum chemotherapy and PD-L1 agents. So let's move on to XMT-2056, Mersana's Immunosynthen ADC targeting HER2. As a reminder, GSK has an exclusive global license option to co-develop and commercialize this candidate. XMT-2056 is in the dose escalation portion of our Phase I clinical trial, which is enrolling patients with a variety of HER2-expressing tumors. And we are pleased to report that in July, we achieved a $15 million development milestone under our agreement with GSK. Payment of this development milestone is due later this quarter. With that, let's turn the call over to Brian for our financial review.

Thank you, Marty. Beginning with our balance sheet, we ended the second quarter of 2025 with $77 million in cash and cash equivalents. Net cash used in operating activities for the second quarter of 2025 was $22.6 million, which included $2.4 million in severance-related payments. And in July, we paid approximately $17.9 million to pay off our debt facility. We continue to expect that our capital resources will enable us to support our current operating plan commitments into mid-2026. Please note that our cash runway guidance does not assume the receipt of any future milestone payments from our current collaborations or proceeds that we may realize from future collaborations. Collaboration revenue for the second quarter of 2025 was $3.1 million compared to $2.3 million for the same period in 2024. The year-over-year change was primarily related to increased revenue recognized under our collaboration and license agreements with J&J and Merck KGaA, partially offset by reduced revenue recognized under our agreement with GSK. Research and development expenses for the second quarter of 2025 were $16.2 million compared to $17.2 million for the same period in 2024. For the most recent quarter, approximately $900,000 of this spending was related to noncash stock-based compensation. The year-over-year change in R&D expense was primarily related to lower headcount and related employee compensation costs, which were partially offset by an increase in costs related to Emi-Le and XMT-2056 clinical development activities and manufacturing activities associated with the company's collaborations. General and administrative expenses for the second quarter of 2025 declined to $7.4 million compared to $10.5 million during the same period in 2024. Approximately $1.1 million in noncash stock-based compensation expenses were included in G&A for the most recent quarter. The year-over-year change in G&A was primarily related to lower headcount and related to employee compensation costs and a reduction in consulting and professional services fees. During the second quarter, we incurred $3.9 million in restructuring charges related primarily to severance and benefit payments, outplacement services and related expenses. And finally, Mersana's net loss for the second quarter of both 2025 and 2024 was $24.3 million. That concludes our business update. Operator, would you please open the call to questions from the audience?

[Operator Instructions] And the first question comes from Tara Bancroft with TD Cowen.

So my question is for the data that are coming in imminently in the second half, can you help us set expectations for what will actually be in the data, like maybe a minimum amount of follow-up that we should expect from patients that are enrolled? And if all of the 45 that are enrolled are going to be included in that data set and/or evaluable? And what benchmarks that you would want to meet or beat?

There was a lot there. Let me try to walk through each of those. We -- once again, we've now enrolled over 45 patients. We would expect that group of patients to be the basis of the data, but we will have to be a little careful about committing to an exact number because we have to treat the patients, get through it, get scans, et cetera. With regards to dose A and B, the one thing I would remind you is it's going to include both dose A and dose B. But just to remind you, dose A started at the beginning of the year. Dose B, as we announced in May that we had started enrolling patients at dose B. So the one point I would make is that the duration of follow-up will be longer on dose A than dose B, but you should have sufficient data on dose B to understand efficacy, safety, durability, et cetera. And so -- and you will be able to -- so kind of your standard presentation like we've done before. And I think -- and then the final part of that is, just to remind you, these are all patients, and we would generally expect that about 40% to 50% of them will be in the B7-H4 high bucket.

Okay. Got it. And just -- I know you don't typically set expectations for efficacy, but maybe just a good benchmark for what you think would be a good result.

Well, I think just to remind you that the efficacy for the standard of care in this setting is a 5% response rate and a 6- to 7-week PFS. So like the data we shared at Munich, we would think that's kind of the minimum bar that if you have the 16 weeks and you have a response rate in the 20s, you're going -- we believe that you would beat the standard of care in a randomized trial fairly readily. Better than that is obviously better. But I think that's kind of the minimum bar that we feel confident moving forward with.

And your next question comes from Jonathan Chang with Leerink.

This is [indiscernible] on for Jonathan. Congrats on the enrollment progress. Can you just provide more color on the implementation of the proteinuria mitigation strategies in the dose expansion cohort?

Sure. So with -- just to remind people with Amendment 5 was put in place at the beginning of this year. What we did in Amendment 5 was, one, we implemented a prospective, in other words, routinely starting in patients, either an ACE inhibitor or an ARB before they even -- I mean, at the beginning of treatment. So the idea was to try to minimize the development of proteinuria. The major change, however, was since we had observed that the proteinuria was primarily albuminuria -- isolated albuminuria in the absence of changes in serum creatinine or serum albumin, with the consultation with our onco nephrologists, the protocol amend us allow to continue to treat patients as opposed to interrupting treatment because previously, we had this kind of protocol mandated interruption. So what we will be able to present you data on is with the updated data set for dose B is at the higher dose, have we been effective in preventing those treatment delays.

The next question comes from Charles

Congratulations on the updates and the enrollment across the board. A couple from me. I wanted to confirm if you've settled in on this TPS of 70 as a B7-H4 high versus a low cutoff. And maybe as a follow-up to the prior question, with respect to the proteinuria mitigation, how would you evaluate like between those 2 doses, if we're talking about something like what kind of a delta in clinical profile, I guess, would justify the additional step of undergoing mitigation steps to go for the more efficacious as opposed to a less efficacious dose?

With regards to your first question, the expansion data set will be part of the data set that we use in finalizing the cut point. I think suffice it to say, even if the TPS score moves a little bit, we fully anticipate based on the literature and our initial backfill and escalation data that we're talking 40% to 50% of the patient population, even if the actual TPS score to define that population changes a little. So we haven't locked in on TPS70 today, but that will be something that we'll use this data set to do. With regards to proteinuria, I mean, ultimately, our hypothesis that came forward out of our initial data set was that these higher doses were resulting in more patients having more than a 30% reduction or getting that initial UPR. So our core hypothesis is that if you don't have the treatment interruptions and more patients are getting a reduction in the tumor, ultimately, that will lead to a better outcome for patients, more responses or better PFS, et cetera. So what we will be looking for in B is that we are able to maintain patients on drug and that will give us better efficacy. If that efficacy trade-off is not good enough, then dose A would be the go-forward dose. But that's a data-driven decision that we'll take. In fact, these data are a critical part of that decision process. So we need to get the dose A and dose B data fully in hand.

And your next question comes from Michael Schmidt with Guggenheim.

Just a couple of follow-ups on the expansion cohorts. Did you say roughly how many patients would be in dose cohort A versus B for this upcoming update in the second half? And what type of venue are you planning to do this at? And then I had a follow-up.

I'll answer the venue question first. With regards to the venue, we have not stated whether this will be a corporate company presentation or a scientific meeting. That's a decision that will be TBD. With regards to the -- how many patients are in each, we haven't provided that degree of specificity, but we'll note that we've been enrolling the dose B patients now for several months. So I think suffice to say there should be a reasonable number of patients at both doses. The only major difference will be the duration of follow-up will be shorter for the dose B patients than dose A patients.

Makes sense. And then a question just on possible next steps as we think about potential Phase III study in TNBC. So just in terms of trial design, should we think about a study that may look similar to the ASCENT study perhaps? And then would you limit enrollment to tpo exposed patients only or also allow naive patients? And if so, I guess, why not? Why wouldn't you include naive patients as well? And yes, just your estimation in terms of what percentage of patients do you think are tpo exposed in the third line and later setting at this point?

I think I'll take the last one first on the topo exposed. To be frank, whether we allow the topo naive or not is sort of a moot point in second or third-line TNBC in the United States today because if you -- as you recall from our demographics, almost all of our patients had seen a prior tpo. So I think that makes it -- once again, the detail of do you allow them becomes kind of irrelevant because from a standard of care point of view, they're all going to have received them or almost all. With regard -- because -- and I think as we see the ASCENT 3 and 4 data come out, that's going to even increase because now they're going to get them first line. So I think the big change we'll see is there's going to be second-line patients that historically would be just getting a tpo, the second- line patients now will be post-topo. So our ideal -- so one of the reasons why do you say post-topo is a couple of things. One, we have a Fast Track designation in post-topo breast cancer. And the way our Fast Track designation reads, it actually allows you to get a little broader than classic TNBC because remember, you have the -- if you just remind you, we have the HER2 lows. So if they've seen like in HER2, that counts. Now obviously, all of this is a discussion with the agency. But we think kind of we have this unique opportunity in this post-topo setting based on the unique properties of our platform. So this is kind of an easy space just to go into given that most patients are going to be in this space anyway.

And then, yes, maybe just a follow-up. I guess, is there an opportunity to perhaps do a study that includes patients beyond the classic TNBC definition, including, for example, HER2 low patients into the same study to expand the opportunity?

Well, I think -- and that's one of the advantages of doing a randomized trial because you'll have a control arm. The agent -- again, we have no agency conversations yet on this. But if you think about it, one of the advantages -- one of the limitations, for example, if you do a single arm, you have to make sure then that every patient that enrolls has seen every potential prior therapy, whereas if you go into a randomized trial, you can be a little looser on that because the control arm will give you -- will account for that. So we do think doing a randomized trial, you can do it pretty much just as fast because your PFS endpoint, your control arm is in 6 weeks. You also get your survival data. You avoid doing a confirmatory trial. And oh, by the way, you might be able then to broaden out your population exactly as you're suggesting.

And your next question comes from Colleen Kusy with Baird.

This is Nick, on Colleen. Just wanted to ask for Emi-Le. Can you comment on how the rate of enrollment is going versus your expectations and whether you plan on opening any additional sites for the expansion? And I had a follow-up after that.

I mean, right now, it's going very well. I mean I think for a TNBC population at a limited number of sites, getting 45 patients who are -- and we -- these are patients who are having to get biomarker data on. So these are all patients who have to get a tissue result tested, et cetera, had to have had a prior topo 1 to 4 prior lines. So it's -- it is -- I think we're very pleased with the outcome of the enrollment. We don't envision needing additional sites to finish expansion. I mean, certainly, as we move into a pivotal, though, we're going to want to expand to a broader population.

Great. And then moving to 2056. I know you commented earlier that enrollment had been a little slower just to some competition in the area. Can you comment on the -- how the enrollment is going there as well? And if you have a decision on which indication to go in with that readout?

Well, just -- we haven't selected obviously an indication for 2056, I mean, other than it's HER2-positive cancers. But I think one of the reasons we are very, very pleased to discuss the $15 million milestone is, this is a program that's been very, very quiet, and we hadn't had a lot of progress. In fact, we were kind of in our last call, kind of downplaying the enrollment a little bit. It picked up, and we made our milestones. So in our view, it's chugging along. And I think we're still maintaining our guidance that we'd like. We're not committing to sharing dose escalation data this year, but we are hoping to share some data, pharmacodynamic data showing that the mechanism of action is, in fact, working in patients.

Your next question comes from Andy Hsieh with William Blair.

So I think you have a couple of months of experience in terms of the trial protocol change to address proteinuria. And I'm curious if you have heard from investigators any feedback regarding the change and potential improvement to allow patients to stay on therapy. So that's question number one. Question number two, just kind of housekeeping, maybe a follow-up to the previous question. So the $15 million milestone payment, is that completely progress-based or we can lean into potential promising efficacy there as well?

So let me -- I'm going to answer the question on Emi-Le, I'm going to turn it over to Brian to talk about the criteria for the $15 million. So with regards to the proteinuria, I think all we can say is that enrollment is continuing at dose B. The investigator enthusiasm remains high. So -- and then we're looking forward to sharing the data.

Yes. And with respect to the milestone, it's a development milestone. But unfortunately, we can't get into additional detail on that. It remains confidential.

And your next question comes from Asthika Goonewardene with Truist.

I think you hit the nail on the head with the whole idea of dose B and trying to see if you're able to keep the patients on therapy longer, which I think is exactly what you need to be doing with an ADC here. But let me ask you this. When you present the -- announce the data later on this year, do you think you'll have that question answered, i.e., does with the prophylaxis and everything going into play that you are able to keep the patients on therapy longer on dose level B. Will that be answered this year? And then I've got a couple of follow-ups.

And while dose B will have more limited durability, I think just to remind you, we were seeing the treatment interruptions in cycle 2 and cycle 3. So we're confident that we'll have sufficient data to at least answer that -- show the difference between what was happening at the higher doses pre-Amendment 5 versus with the new proteinuria mitigation strategy. So I think we're pretty confident in our second half data is why we should be able to answer that question.

Got it. Excellent. And then just technicality here, what proportion of the TNBC patients that you recruited have actually seen ENHERTU? And how do you see that play out as you're thinking about recruiting a pivotal study? Obviously, we're going to get Trodelvy in that frontline setting kind of impacting here. But do you think you'll see patients who've seen both Trodelvy as well as ENHERTU?

Well, just to remind you, in our initial demographics that we presented previously, 1/4 of patients that had both I mean think about that. I think it was 27% of patients have seen both Trodelvy and ENHERTU. Now is that going to be the exact same in our study going forward? It may be a little lower because what we suspect, given the limited outcomes with that strategy, if we have a pivotal study open that allows patients to go on whether they've had either Trodelvy or ENHERTU, we think a fair amount of those patients who come in with the HER2 low will then have an opportunity to get the ENHERTU and then go on to our trial. Now once again, this is something will be part of the details of study design when we engage with regulatory authorities. But that is certainly something we are entertaining.

Got it. And then we talked a little bit about other breast cancer indications. But so let me ask you just point blank, Marty. The next steps and going into a pivotal study, will you be kind of maybe focusing exclusively on TNBC? Or do you want to do some more work to kind of get some of these other areas of breast cancer, maybe the HER2 lows, generate some more data on that and kind of also kick off a pivotal study that encompasses that patient population as well?

We would love to do additional activities, including hormone receptor positive breast cancer. I think there are opportunities to study that. At this point in time, given our current kind of data and capital constraints, we are focused on TNBC. But what I want to remind you is in our Fast Track designation, it's not limited to TNBC. It does include these HER2 lows. So I think we have to think about it. This is where we probably need to think about the population a little different of a classic TNBC. In a way, we're thinking of as post-topo breast cancer is actually kind of a wider population than just TNBC. So this will be a critical part of our discussion of the detailed design. And we are -- we do have data in these HER2 low post in HER2 patients. So this will be something to look forward to.

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

Thank you, operator, and thanks, everyone, for dialing in. We hope you enjoy the end of the summer. That concludes our call, operator.