Good morning, and welcome to Mersana Therapeutics Fourth Quarter and Year End 2020 Conference Call. Currently, all participants are in a listen-only mode. There will be a question-and-answer session at the end of the call. I would now like to turn the call over to Sarah Carmody, Executive Director, Investor Relations and Corporate Communications.

Please proceed..

Good morning, and welcome to Mersana's third quarter 2020 conference call. We issued a press release earlier this morning reviewing our fourth quarter 2020 and full year financial results and business updates, which will be covered on this call. A replay of today's call will be available on the Investors & Media section of our website.

After our prepared remarks, we will open the call for Q&A. Before we begin, I'd like to mention that our call will contain forward-looking statements within the meaning of federal securities laws. These are not statements of historical facts and are based on management's beliefs and assumptions and on information currently available.

They are subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially, including the risks that preclinical testing or early clinical results may not be predictive of the results of success of our ongoing or later preclinical or clinical studies, that the identification, development and testing of the company's product candidates and new platforms will take longer and/or cost more than planned, and that our clinical studies may not be initiated or completed on schedule, if at all.

These risks are discussed in the company's SEC filings, including, without limitation, the company's annual report on Form 10-K filed on February 26, 2021, and subsequent filings.

In addition, while we expect that COVID-19 pandemic might adversely affect the company's preclinical and clinical development efforts, business operations and financial results, the extent of the impact on the company's operations and the value of end market for the company's common stock will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, physical distancing and business closure requirements in the U.S.

and in other countries and the effectiveness of actions taken globally to contain and treat the disease. Except as required by law, the company assumes no obligation to update these forward-looking statements publicly, even if new information becomes available in the future.

With that, I will turn the call over to Anna Protopapas, Mersana's President and Chief Executive Officer..

Thank you, Sarah. Good morning everyone, and welcome to our fourth quarter and full year 2020 corporate and financial update call. Joining me today with prepared remarks are Arvin Yang, our Chief Medical Officer; Tim Lowinger, our Chief Science and Technology Officer; and Brian DeSchuytner, our Senior VP of Finance and Strategy.

I'm also joined by the rest of the executive team, who will be available for your questions, including the newest member, Carla Poulson, our Chief Human Resources Officer who joined us in January..

Thank you, Anna and thank you everyone for joining us today. Let me start by summarizing the data we've generated to date that support the potential for UpRi to become the foundational medicine in ovarian cancer.

As you'll recall, we've disclosed the substantial data from the ongoing study in four different disclosures in the past 12 months, including a comprehensive disclosure on the January 5 of this year.

These data support the potential of UpRi to provide significant benefit for heavily pretreated ovarian cancer patients, who have exhausted other options, including bevacizumab and PARP inhibitors and have a poor prognosis.

Specifically, we have consistently shown robust activity substantially above the current standard of care, including complete response and a tolerability profile without the severe neutropenia, neuropathy, and ocular toxicities that limit other ADC platforms.

This has the potential to facilitate the combined ability of UpRi with agents used in earlier lines of ovarian cancer treatments.

Let me start with UPLIFT, our single-arm registration strategy in heavily pretreated platinum-resistant ovarian cancer, the first step in our objective to building UpRi as a foundational medicine in the treatment of ovarian cancer. With FDA feedback and with strong support from the cooperative groups, both in the U.S.

and in Europe, we are well on our way to initiating dosing in UPLIFT in March. Let me summarize the key features of UPLIFT. First, the patient population addresses substantial unmet medical needs and affords us the potential for significant label differentiation.

UPLIFT is designed to enroll platinum-resistant patients who have received up to four lines of therapy, consistent with the population in the expansion cohort where we have already seen data supporting the potential for robust activity.

The inclusion of patients with four prior lines differentiates UPLIFT from other ongoing and historical studies in late stage ovarian cancer. Note that bevacizumab pretreated and bevacizumab naïve patients are included in the UPLIFT cohort in a manner consistent with the bevacizumab label.

This is another important differentiator because it allows us to explore the potential of UpRi to address the unmet medical need of patients who have and have not been previously treated with bevacizumab in a single study..

Thank you, Tim. Good morning everyone and thank you for joining us. I'll now review some of the key financial highlights from our fourth quarter 2020 results, and I'll start with our cash position. We ended 2020 with $255 million in cash and cash equivalent. Net cash used in operating activities in the fourth quarter were $17.3 million.

We expect that our available funds will allow us to meet our current operating plan commitments for approximately the next two years. In addition to our current cash position, we have the option to draw funds through the amended existing debt financing agreement with Silicon Valley Bank refinanced in August of last year.

And now some of the key highlights from our fourth quarter 2020 financial results. Research and development expenses for the fourth quarter of 2020 were approximately $22.9 million compared to $12.4 million for the same period in 2019.

The difference was primarily due to an increase in UpRi and XMT-1592 clinical expenses and increase in manufacturing activities for UpRi and our discovery stage programs, increased headcount and a non-cash increase in the valuation of stock based awards as a result of stock appreciation.

All of these were partially offset by a decrease in preclinical development and manufacturing expenses for XMT-1592. General and administrative expenses for the fourth quarter of 2020 were approximately $5.9 million compared to $4.2 million in the same period in 2019.

The increase was primarily due to an increase in consulting and professional fees and increase in facility related costs as a result of the extension of our lease in March, 2020, and a non cash increase in the evaluation of stock based awards as a result of stock appreciation.

Net loss for the fourth quarter of 2020 was $28.8 million or $0.42 per share, compared to a net loss of $16.2 million or $0.34 per share in the same period of 2019. Weighted average common shares outstanding for the quarters ended December 31, 2020 and December 31, 2019 were approximately $69 million and $48 million, respectively.

I'll now turn the call back to Anna..

Thank you, Brian. Before we open the call to questions, I will like to outline our goals and milestones for 2021, which center on building UpRi as a foundational medicine in the treatment of ovarian cancer and building out our pipeline to demonstrate our position as leaders in ADC innovation. I will start with UpRi.

First, we are on track to initiative the planned UPLIFT single-arm registration strategy in platinum-resistant ovarian cancer this quarter.

As per our longer term lifecycle management studies for UpRi in ovarian cancer, our goal is to initiate the dose escalation portion of the UPGRADE study staring with the combination study with platinum in Q3 of this year. We are considering additional lifecycle management studies, and we will share these details as we finalize our plan.

We are excited for the potential of these studies and the opportunity to build UpRi as a foundational medicine for ovarian cancer across lines of therapy with the objective of creating a differentiated label in this indication.

Lastly, for UpRi we expect to have a meaningful number of lung cancer patients enrolled in the expansion study and to be able to provide a data update from this cohort in the second half of 2021. For XMT-1592, our NaPi2b Dolasynthen ADC we plan to disclose dose escalation data in the second half of 2021.

As we have said in past, our objective is to compare the UpRi lung adenocarcinoma expansion data with the XMT-1592 data to make decisions as to which molecule we will take forward based on key tolerability as well as activity. We expect to be able to outline our further development plan for XMT-1592 in the fourth quarter of 2021.

For XMT-1660, we plan to complete IND enabling studies in 2021 and initiate the Phase I dose escalation studies in early 2022. For XMT-2056 our first STING-agonist ADC Immunosynthen platform, we plan to complete IND enabling studies and disclose the target by the end of this year and initiate the Phase 1 dose escalation study in early 2022.

Finally, we will continue to leverage our proprietary platform and continue to expand our pipeline of innovative ADC candidates while proactively evaluating potential collaborations for current and future progress.

In closing, we have another busy year ahead of us with multiple value driving opportunities as we focus on building UpRi and building out the pipeline, with a promisingly drastic and exciting pipeline differentiated platform, a highly experienced team, and a strong balance sheet, we believe we are well positioned to execute against these goals, and to ultimately reach our overarching mission to discover and develop life changing ADCs for patients much faster.

With that, I will turn the call over to the operator for Q&A..

Thank you. Our first question comes from the line of Jonathan Chang with SVB Leerink. Your line is open. Please go ahead..

Hi team, this is John Barrett on for Jonathan, congrats on the progress in 2020.

My first question is, now that you're closer to the initiation of UPLIFT, what are your expected timelines for the trial related to full enrollment and then obviously potential read out of top line data?.

Yes, great question Jonathan. I think we're very focused on getting UPLIFT up and running. We're really on the cusp of beginning to dose patients. We have as you know, agreed with the FDA that we could do this as an amendment to the existing trial.

And if you recall, we indicated on January 5 that we had about 40 sites already as part of the expansion cohort. We're working with the cooperative groups in Europe and we'll be bringing additional sites up in Europe. And we feel quite good about the momentum behind the agent and the momentum we hope will translate into enrollment of UPLIFT.

At this point we are holding back from giving specific guidance.

We just want to get the trial up and running, but I think a lot of positive support from the cooperative groups, the momentum we've seen in enrollment in the expansion cohort makes us optimistic that a year from now we will be substantially enrolled in the study, but I think we'd like to wait a little bit before we give definitive guidance..

Yes, that's helpful and following up, given this more for clarity, given the two endpoints of ORR in the higher NaPi2b population and the ORR in the overall population, is it possible that you have two top line data readouts where you have ORR top line for first, the higher population and then later on the ORR for the entire population or do you expect those to be coming at the same time?.

I'll let Arvin answer the question, but I think I might fictionally said would be coming out at the same time, but Arvin maybe you can confirm that?.

Yes, thank you Anna and just to confirm that's correct. You know, that based upon the way the study is designed we would have both endpoints at the same time..

And just one last one, what do you see is the bar for a go, non-go decision in lung cancer and what gives you confidence that UpRi could succeed in lung cancer?.

So, let me answer your second question and maybe, I'll then ask Brian to answer your first question. So what do we know about NaPi2b in lung cancer? We know that it's expressed there in lung adenocarcinoma, not in other histologies and we've published data where we showed the work was done to understand the expression.

We saw in, as you recall back the data we disclosed in March, at the NTB, we had several lung patients who had one partial response. We had multiple patients with prolonged stable disease. So the target is there. We've seen early signs of activity. We are enrolling in expansion cohort of about 40 to 45 patients.

We did say that what we have seen, both in tissue banks as well as in patients is that the distribution the prevalence of NaPi2b high. It is different in ovarian -- in lung and in ovarian. In ovarian we see the distribution of NaPi2b to the high as being that H score of about 110. You know that in ovarian about two thirds of patients are above that.

I think what we are seeing in the clinic is that more like 14% of patients are above that, that threshold that are on the NaPi2b high side. So I think we need to complete the expansion cohort and really understand the but the target is there and we've seen some early signs of activity.

Brian, do you want to talk about the bar?.

Sure. So in non-small cell lung cancer the standard of care following progression on checkpoint inhibitors and platinum based care -- chemotherapy or failure of targeted therapy for patients with tumors that harbor the oncogenic driver mutations that make those appropriate, is docetaxel alone or in combination with targeted therapy.

The standard of care is an overall response rate of somewhere between 14% and 23%. In a median peer that's a three to four months, so remarkably similar actually. So the performance of the single agent chemotherapy standard of care and platinum-resistant ovarian cancer it's about, the unmet need in this space remains very significant.

And to your question about the bar, it really comes down to the totality of data right, there's the activity. There's the tolerability profile where we think we've shown some real differentiation over other platforms that also come into play..

Got it, thank you..

Thank you. And our next question comes from the line of Konstantinos Aprilakis with Stifel. Your line is open. Please go ahead..

Good morning. Thanks for taking my questions.

As we wait for UPLIFT to initiate, can you disclose how many additional patients have been enrolled into the ongoing expansion cohorts since your last readout and what are the current plans if any for additional data disclosures from the upper expansion cohorts? Do you plan on presenting any preclinical data that would be further validating to potential combinations in UPGRADE..

Yeah, thanks Konstantinos for that question. So, we are continuing to see momentum in enrollment of expansion cohort. So I think we've always said that that's encouraging in terms of converting the expansion cohort into the UPLIFT. In terms of data disclosures, we have a few different opportunities and let me just outline our considerations here.

We've done four data disclosures between March of 2020 and January 5. I think we've disclosed a very, we shown a very consistent and promising profile for UpRi. We're now single mindedly focused on getting UPLIFT up and running and rolling as quickly as possible, and bringing this agent, promising medicine to patients.

As we could work, the expansion cohort to UPLIFT that's happening on a site-by-site basis, so at some point, we're going to close down the expansion cohort. We're going to lock and clean the database. And I think that could give an opportunity for us to disclose the data either as a publication at the scientific conference or both.

I think at this exact point, we're not in a position to know what the exact timing is of that disclosure, but obviously, we have that option in front of us. We are also finalizing the expansion cohort, the cutoff for the biomarker and I think that's another opportunity for us to share more data with you.

And I think we're trying to determine what is the right forum to disclose that, but that would be another opportunity for data disclosure. But again, this is a year where we're very focused on initiating UPLIFT, initiating UPGRADE and really putting in motion the studies that will bring this agent to patients.

And we will, of course, disclose data along the way, but our top priority is to get these studies up and running..

Thanks for that. That was very helpful.

And then, I guess, just coming at it from just a different angle for UPGRADE, how should we think about the other potential combination partners that you're thinking about in the umbrella study? And again, is it going to be sort of preclinical data to support those decisions that we would see or I guess, just under underlying rationale for the combinations that you pursue?.

So we are working through all those additional combinations and I think we'll be able to share more data in the near term, but there are multiple options here. And I know that Arvin and Tim are collaborating to do what is necessary from a preclinical standpoint to understand the potential of some of the additional combinations..

All right, perfect. Thanks guys. Congrats on the progress..

Thanks..

Thank you. And our next question comes from the line of Boris Peaker with Cowen. Your line is open. Please go ahead..

Good morning. My first question is on the diagnostic side, you mentioned that there's a possibility here of a companion versus a complimentary diagnostic.

Is there a difference from the FDA regulatory perspective for either of those diagnostic approaches?.

Arvin, do you want to take this?.

Sure, let me start. And, of course, just to address the question between a companion versus a complimentary diagnostic, for a companion diagnostic, the guidance really is in relationship to that test is utilized to identify and select patients that would then have an indication in order to be treated with the drug.

So in the instance that the companion diagnostic would be utilized, it would be primarily based on the fact that the benefit risk is focused specifically on those patients with the higher NaPi2b status.

Now, in a secondary instance, where a complimentary diagnostic would have value is whereby the benefit risk is considered supportive to approved in the broad indication, meaning we called this NaPi2b status.

However, having a diagnostic available may be helpful proposition to understand that there's differential benefit risk within the population with the higher or lower NaPi2b status.

And so the clear distinction here is that in the complimentary diagnostic, there would not be a requirement for a test result in order for a physician to be able to potentially utilize UpRi in patients assuming it was approved in that broader indication..

Got you.

And my second question is, for the UPGRADE study, is the goal to ultimately find a combination for running a future pivotal study for that combination? Would you just plan to generate enough data for listing in parallel with the UPLIFT regulatory study, so that you could compliment the approval based on UPLIFT?.

Boris, thank you for the question. We are actually finalizing the design to our confirmatory trials, and we will have an opportunity to share it with externally in the near term. So I would ask you to be a little patient with us as we finalize those plans.

But our objective as we said before, is to have a confirmatory trial in the earlier line of therapy and be able to move UpRi in the as a treatment in platinum-sensitive..

Great. Thank you very much for taking my questions..

Thank you. And our next question comes from the line of Jessica Fye with JPMorgan. Your line is open. Please go ahead..

Hi, guys good morning. Thanks for taking my question.

First is, when do you expect to solidify the cutoff for higher NaPi2b expression? And second is, to the extent of the cutoff for higher NaPi2b expression changes relative to what you have been using? Can we expect you to update the expansion data analyzed using that new cutoffs for investors? Can you get a clearer sense of the potential efficacy in this group?.

Yes, just is a great question. We are in the process of finalizing the cut off and we will be sharing that data. We are trying to complete and wrap up our work and then find the right forum to do that, as well as really describe the whole strategy around the diagnostic, the commercial diagnostic.

So in that context, we will also show the whole analysis which includes really showing that science and corporate data that led us to the determination of the cut off..

Great, thank you..

Thank you. And our next question comes from the line of Tom Shrader with BTIG. Your line is open. Please go ahead..

Thank you. Let me congratulate everyone on a nice year. I had a question kind of triggered by your careful language about prior Avastin use in UPLIFT.

Who is not going to have Avastin, that patients with platinum-resistant cancer, and then three lines of chemo? And are they going to be sicker?.

Brain, would you like to pick this question or Arvin?.

Sure. I can start and then Arvin you can join in. So Tom, thanks for the question. And I think this is a really important differentiator here in how we're pursuing UPLIFT and what we think is important for our label. So you will notice from the demographics of our expansion data that about 70% of patients that we enrolled had prior Avastin.

And now there are -- there may be there's reason to see that high. Avastin is approved in the frontline. It's approved in platinum-sensitive relapsed and it's approved in platinum-resistant disease. But not everybody is really a candidate for Avastin and but there's a minority of patients.

And that might be because of a comorbidity or concerns about bowel obstruction or wound healing or hypertension.

What we wanted, the important thing here though is, in a single study in a very capital efficient way, we want to be able to address both populations, the people who have had Avastin previously and the people who have not had Avastin previously and because of the nature of the Avastin label, we're able to do that in one study.

Avastin in platinum-resistant disease is only approved for patients who have had only one or two prior lines of therapy. So for patients with three or four, we can pursue a fast path to market.

But while also including patients who may not have seen Avastin before, and this is a really important point, it allows us to go after a very broad patient population in a single-arm study..

All right, great, got it.

Right, and then a question on UPGRADE, if you are combining with platinum to get this through IRBs and stuff, will you have to give patients full dose platinum and then titrating your drug or can you start at lower levels of both drugs, do you think?.

Arvin, do you want to take this?.

Yes, sure.

So we'll be coming out with obviously our trial design in relationship to the UPGRADE, but what I would want to start with from the standpoint is remember, one of the key differentiators for UpRi is really from the standpoint of again, the fact that our safety profile has been quite consistent with the lack of that severe neutropenia, that peripheral neuropathy as well as the ocular toxicities.

So it sets us up in a way that really fully appreciate and maximize the potential to combine, in particular with platinum agents where there can be associated neutropenia as one example. And so we'll be coming out with the trial design. Obviously, safety is paramount in relationship to these Phase 1 studies.

And so, certainly dose escalation is quite standard, just in relationship to how these studies are designed in order to ensure that we're appropriately dose escalating and maximizing the ability for these two compounds to be either additive or potentially synergistic..

Okay, great. Thank you..

Thank you. And our next question comes from the line of David Nierengarten with Wedbush Securities. Your line is open. Please go ahead..

Thanks for taking the question. Maybe a follow up to a couple other ones on UPGRADE study. Do you anticipate or is there a possibility to use UpRi as a maintenance therapy or extend the dose and beyond the fixed platinum cycles or are you planning to focus in on dosing with platinum for that fixed set of cycles? Thanks..

David, so, yes, go ahead Arvin..

Oh sure. I was just going to say, I think it leads back to the response we've mentioned with just from the standpoint that, again that tolerability profile, lends itself toward the ability to dose really still potentially progression in regards to UpRi.

So as we're evaluating the dose escalation strategy here, we're really going to maximize the characteristics of each of these compounds to make sure that we're trying to maximize the benefit for patients per se.

So certainly, from a combinability perspective, we do believe that there is going to be the potential to combine and that's how we're thinking about approaching this. And again, I think with the line of sight toward the idea that we will try to maximize each of these agents in a way to benefit most of those patients..

Okay and I mean, would there be or I know you're disclosing details later, but would there be an option do you think for patients to continue on maintenance therapy, anything like that as part of the study, assuming you began with a fixed set of cycles to combine with platinum?.

Yes, short answer is that is definitely under consideration from the standpoint, remembering that for chemotherapies, it's typically a fixed number of cycles. And we have not seen that type of treatment approach with UpRi mono therapy..

Okay..

Thank you. And I'm showing no further questions at this time. And I would like to turn the conference back over to Anna Protopapas for any further remarks..

I just want to thank you all for listening in. This is another really exciting year for us as we really built UpRi and built out the pipeline. So thank you very much for your continued support..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day..