Ladies and gentlemen, thank you for standing by. And welcome to Mersana’s First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker host, Sarah Carmody. Go ahead..

Good afternoon. Welcome to Mersana’s first quarter 2021 conference call. Earlier today we issued a press release reviewing our first quarter 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..

Thank you, Sarah. Good afternoon, everyone. And welcome to our first quarter 2021 corporate and financial update call. Joining me today with prepared remarks are Arvin Yang, Chief Medical Officer; Tim Lowinger, our Chief Science and Technology Officer; and Brian DeSchuytner, our Senior VP of Finance and Product Strategy.

I’m also joined by the rest of the executive team who will be available for your questions, including the newest member Alejandra Carvajal, Chief Legal Officer, who joined us in April..

Thank you, Anna, and thank you everyone for joining us today. Let’s take a step back and recap what we’ve demonstrated with UpRI, why we’re so encouraged by UPLIFT and how we envision doubling or tripling the number of patients with ovarian cancer that could benefit from UpRI through our life cycle plans.

Today we’ve seen positive results with UpRi in heavily refractory patients including complete responses in patients who have failed bevacizumab and PARP inhibitors. Anti-tubulin are an established class in the ovarian cancer space.

But both anti-tubulin and other ADC platforms in this space have been limited by severe adverse events, including peripheral neuropathy and neutropenia and also events deeply concerning to patients like alopecia.

UPGRADE is a Phase 1 umbrella study designed to evaluate UpRi in combination with other ovarian cancer therapies to explore the role of UpRi in earlier stages of the disease.

We first intend to combine with platinum, as platinum therapy is currently the main stage therapy in earlier line platinum sensitive ovarian cancer and we expect to initiate patient dosing in the third quarter of this year.

This Stage 1 open label dose escalation portion of the study will determine the maximum tolerated dose and safety and tolerability of an every four-week administration of UpRi in combination with Q4 week administration of carboplatin for six cycles and then UpRi monotherapy will be continued in platinum sensitive patients with high grade serous ovarian cancer who have received one to two prior platinum-based regimens.

Patients will not be pre-selected for NaPi2b expression, but archival or fresh tissue will be required for retrospective assessment of expression.

Upon completion of the dose escalation portion of the study, we plan to initiate the expansion portion in combination with carboplatin for six cycles and then UpRi monotherapy will be continued to assess the feasibility for this combination therapy, as well as efficacy and approximately 30 patients in order to inform next steps..

Thanks, Arvin, and good afternoon, everyone. Today, I will focus on XMT-2056, our first Immunosynthen STING-agonist ADC and XMT-1660, our B7-H4 Dolasynthen ADC, both of which are advancing through IND-enabling studies and we believe remain on track to enter the clinic in early 2022.

In April, we were pleased to share additional encouraging preclinical data for both of these programs at the virtual AACR meeting in the form of three e-posters. I’ll start with XMT-1660. B7-H4 is a promising target for Dolasynthen ADC due to its expression profile, as well as its function.

B7-H4 is expressed on multiple tumor types with high unmet medical need, including breast, endometrial and ovarian.

Based on preclinical studies, we have shown that our DolaLock ADC leads to immunogenic cell death and that our DolaLock payload can activate dendritic cells in the tumor microenvironment, leading to a potential antitumor immune response in addition to the direct cytotoxic anti-tubulin effect.

Because B7-H4 is expressed on tumor cells, as well as immunosuppressive tumor associated macrophages, it provides a potential opportunity to co-op those macrophages in a targeted manner to further contribute to both the cytotoxic and immunogenic effects and create what we describe as a perfect storm in the tumor microenvironment..

Thank you, Tim. Good afternoon, everyone, and thank you for joining us. I will now review some of the key financial highlights from our first quarter 2021 results. I’ll start with our cash position. We ended the first quarter of 2021 with $228 million in cash and cash equivalents.

Net cash used in operating activities in the first quarter was $27 million. In addition to our current cash position, we have the option to draw funds through the debt financing agreement with Silicon Valley Bank refinanced in August of last year.

We expect that our available funds will allow us to meet our current operating plan commitments for approximately the next two years. And now some of the key highlights from our first quarter 2021 financial results.

Research and development expenses for the first quarter of 2021 were approximately $27.4 million, compared to $12.2 million for the same period in 2020.

The difference was primarily due to an increase in UpRi and XMT-1592 manufacturing, clinical and regulatory expenses, and increase in manufacturing activities for our preclinical and discovery stage programs and an increase in headcount.

Non-cash stock-based compensation expense included in these research and development expenses increased by $1.5 million, primarily related to an increase in the valuation of stock-based awards as a result of stock price appreciation.

General and administrative expenses for the first quarter of 2021 were approximately $7.2 million, compared to $4.9 million in the same period in 2020. The increase was primarily due to an increase in headcount and consulting and professional fees.

Non-cash stock-based compensation expense included in these general and administrative expenses increased by $0.9 million, primarily related to an increase in the valuation of stock-based awards as a result of stock price appreciation.

Net loss for the first quarter of 2021 was $34.7 million or $0.50 per share, compared to a net loss of $16.9 million or $0.35 per share for the same period in 2020. Weighted average common shares outstanding for the quarters ended March 31, 2021 and March 31, 2020, were approximately $69 million and $48 million, respectively.

I will now turn the call back to Anna..

Thank you, Brian. I believe we’re well-positioned to continue to execute against our 2021 goals of building UpRi as a foundational medicine in the treatment of ovarian cancer and building out our pipeline of innovative ADCs addressing areas of high unmet medical need.

Before we take Q&A, I’d like to mention that this past Saturday, May 8th was World Ovarian Cancer Day. And I’d like to recognize the women living with ovarian cancer, survivors, their families and the many patient advocacy groups around the world promoting awareness about this devastating disease.

Unfortunately, there remains a significant unmet medical need and limited treatment options for these women.

I would also like to take this opportunity to thank the Mersana employees who are committed to improving outcomes and quality of life for women with ovarian cancer through their tireless work in developing UpRi and other potential life-changing ADC therapies, because we know that patients are waiting.

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

Thank you. And our first question is coming from the line of Jonathan Chang with SVB Leerink. Your line is open..

Hi. Thanks for taking my questions.

First question, how much has COVID-19 impacted your UpRi ovarian cancer clinical trial experience to-date? And how should we be thinking about the potential impact moving forward with the recent initiation of UPLIFT?.

Jonathan, thanks for the question. We’ve been very fortunate in that to-date we have seen robust enrollment in the expansion cohort.

And we -- as we have said, we will provide guidance on further enrollment for UPLIFT, but we believe we’re well positioned because, as you know, those UPLIFT is an amendment to the existing expansion cohort and we think -- we believe that, that momentum we’ve seen an enrollment in the expansion cohort will be able to carry forward to UPLIFT and UPLIFT also has some design features that I think could contribute to our optimism about recruitment on UPLIFT.

As you know, it’s an amendment. We do not require selection of patients for NaPi2b biomarker. We have broad inclusion criteria including patients up to four lines of therapy. We are not excluding patients who are baseline peripheral neuropathy, a patient population, very similar to what was in the expansion cohort.

And equally important with partnered with GOG and ENGOT. GOG being the cooperative group in the U.S. and ENGOT being the cooperative group in the EU. So we are quite optimistic that we will continue to see a robust enrollment as we have seen in the expansion cohort.

Of course, as we get further ahead with the -- with UPLIFT, we’ll be able to give more definitive guidance. But at this point, we feel pretty good about what -- where we are..

Got it. Thank you.

And second question, can you help set investor expectations for the UpRi and XMT-1592 lung cancer readouts expected in the second half?.

Yeah. So we are on track to enroll about 40 to 45 lung adenocarcinoma patients with UpRi and disclosed the data in the second half of the year.

We did indicate at an earlier call that the prevalence of NaPi2b high in the lung adenocarcinoma outpatient group is lower than it is in ovarian, about one-third of the patients have NaPi2b high as defined in the ovarian cancer cohort. But we will have 40 to 45 patients that are unselected and we’ll be able to disclose that data.

In terms of 16 -- XMT-1592, we are also on track in the dose escalation to disclose data in the second half of the year. As I mentioned on the call, we have exceeded MTD and are now in dose exploration and we’ll be able to disclose that data, a comprehensive data update on the dose escalation in the second half of the year..

Got it. Thanks for taking the questions..

And our next question is coming from the line of Tom Shrader with BTIG. Your line is open..

This is Carry Ari for Tom. Thanks for taking our questions. My first one is regarding relation between NaPi2b expression and duration of response.

Are there any studies preclinical or clinical, maybe based on Genentech ADC that have shown whether or not NaPi2b expression level changes post-treatment? And if that, it plays any role in defining the durability of response?.

Arvin, would you like to take that?.

Sure. Thank you for the question. So let me break that question down first, just in relationship to first, if there’s any evidence of changes in regards to NaPi2b expression based upon treatment or within different lines of therapy. And so we’ve looked at our tumor banks, as well as our samples in regards to archival versus fresh tissue.

And what we do see is consistency in regards to levels of expression, meaning that if a patient is a higher expressor than it’s concorded in relationship to their prior archival tissue versus a fresh tissue.

And the pull-through in relationship to this can be that as we think about the life cycle of UpRi, we do have anticipation that the levels of expression could be consistent in earlier lines of therapy in regards to the prevalence level. In regards to the second question in regards to duration of response.

Let me first remind you that in our expansion cohort data that we’ve previously shared, we’ve seen an overall res -- objective response rate of approximately 28% in the total population and with enrichment based upon a TPS cutoff of greater than 75%. We saw that enrichment increased to 39% ORR relative to the 11% seen in the lower NaPi2b expression.

So we do see the potential for enrichment of objective response rates. In regards to duration of response, however, we do -- and this is based upon small sample sizes, appear to have relatively consistent durations of responses, whether they be NaPi2b higher versus NaPi2b lower.

Again, recognizing that there were a limited number of patients in the lower NaPi2b populations of two patients that had objective responses..

Got it. And for the pivotal study, you have bevacizumab naive patients with one to two prior therapies in your exclusion criteria.

Can you elaborate on the roll-off of bev in that setting and if you can share your thoughts on the possibility of adding Avastin to the platinum combination in the UPGRADE study?.

Arvin, do you want to take that?.

Yeah. Absolutely. Thank you. So in regards to the bevacizumab in eligibility criteria, it’s consistent with what the bevacizumab label is. And so bevacizumab per label is required for or is indicated in regards to ovarian cancer patients with one to two prior lines of therapy.

However, it is not indicated in those patients on three to four prior lines of therapy. And so what we’ve been able to achieve in one study is in order to then be comprehensive in regards to being consistent with what the bevacizumab label is.

Recognizing that in our expansion cohort, from a large proportion of our patients, 70% did have prior bevacizumab therapy and so we do have a broader indication just based upon our eligibility criteria. Now in regards to the second question, in regards to the potential to combine with bevacizumab.

As I’ve described earlier in the relationship to our UPGRADE study, we are first combining with carboplatin because it is in earlier lines of therapy, a foundational regimen in relationship to platinum therapy.

As we think further in relationship to UPGRADE as an umbrella study where there can be multiple cohorts added, we are thinking of multiple different regimens, whether they be bevacizumab, whether they be a non-platinum combination, a PARP inhibitor or even an immuno-oncology agent..

That’s helpful. And maybe the last one for non-small cell lung cancer. So tubulin targeting chemotherapies are often used for these patients. Do you think that can impact the efficacy of your ADCs or you think yours is a different type of tubulin inhibitor, any thoughts there..

I think instead of speculating, I think, I would guide you to the second half of the year where we will be able to disclose our expansion cohort data that, as I said, will include 40 to 45 patients..

Great. Thanks, and congrats on the progress..

Thanks..

And our next question coming is from the line of Jessica Fye with JPMorgan. Your line is open..

Hi. This is Daniel McElligott for Jessica. Thank you very much for taking our question. First one, you previously disclosed duration of response of approximately five months for UpRi in high expressors under the old diagnostic methodology.

What was the duration of response for UpRi in high expressors using the new TPS greater than or record 75% diagnostic methodology?.

It does not change. Arvin, is that correct? You could have done that..

That’s right. That’s right. Thank you, Anna. So, Daniel, when you look at our webinar relationship to the TPS, you’ll see that the responders actually, there’s the same number of responders there. So the duration of response does not change, because it only looks at the responders..

Okay. Got it.

And then moving maybe to the lung, can you elaborate for us the enrollment dynamics for the lung cancer cohort and the expansion cohort UPLIFT?.

I’m sorry, what do you mean with enrollment? Can you clarify?.

It seems to have taken much longer than the ovarian cancer cohort and kind of understand what has been the push and pull and how enrollment is….

Yeah. Thanks for the question. I think last year, we did disclose that we were delayed in really initiating certain sites as a result of COVID, sites that we were counting on to be our primary lung enrollers. That’s behind us now. These were sites that some of them were in Australia, where there were delays to priors and then COVID.

I think that -- those delays are behind us. We’ve been able to overcome those challenges we faced last year and are on track to recruit the 40 or 45 patients we’re targeting..

Okay. Makes sense. And then can you provide us some color on the dose escalation algorithm utilized for the dose escalation study of XMT-1592 and your strategy for exploration of further doses and schedules from that year..

I would say that I don’t think we can share more details. I do want us to remain discipline and really share comprehensive data disclosures rather that are really meaningful to investors rather than get into parts of the data set.

This is a very typical dose escalation and study and we’ll be able on track to disclose data in the second half of the year..

Okay. Great. And maybe one last question. With MTD achieved for XMT-1592. Can you remind us how much data you want to generate before making a call on the asset on and XMT-1592 are pre to advance in lung? And thank you for taking of all my questions..

Yeah. I -- again, I think, we want to be making robust data driven decisions. In terms of the dose escalation for XMT-1592, we will have an understanding of exposure. We’ll have an understanding of the MTD. We’ll have an understanding of the optimal dose regimen.

And I think, obviously, safety profile, early signs of efficacy and that -- the totality of that data would really guide us as to what the next appropriate step is..

Great. Thank you very much..

And our next question is coming from the line of Boris Peaker with Cowen. Your line is open..

Great. My question is maybe initially on the pace of enrollment in the ovarian UPLIFT study. Earlier today, Immunogen announced the delay in the pivotal study readout due to COVID-19 impact.

Just curious to see if you’re seeing any impact compared to your estimated timeline of enrollment?.

So I think I can’t comment on the expansion portion of the study, which, as you know, we’re bringing to closure and converting those sites to UPLIFT. I can tell you that we’ve had robust enrollment in the expansion cohort and we expect we’ll be able to leverage that as we convert sites from the expansion cohort to UPLIFT.

Obviously, we’re only at the beginning of UPLIFT, but we are quite encouraged with the excitement we’ve seen from investigators, the support we’re getting from GOG and ENGOT. And of course, the design of UPLIFT, as we’ve said in the past, does provide for some streamlining that we believe could help with enrollment. So we are not selecting.

We have broad inclusion criteria. We are not excluding patients with underlying neuropathy. So we hope all of these factors will allow us to really achieve our enrollment goals for UPLIFT. Again, though, we’re just starting UPLIFT.

So we’ll be able to give more definitive guidance for our enrollment targets once we are a little further ahead in the study..

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

And our next question is coming from the line of Colleen Kusy with Baird. Your line is open..

Hello. My name is Benjamin Kallo. I’m on for Colleen. Thank you so much for taking our question.

For the diagnostic, what are the next steps to completely validate the diagnostic? And then maybe could you also touch on what the timelines look like?.

Arvin, do you want to take this?.

Yeah. No. Thanks, Anna. Thanks, Ben, for the question in regards to the timelines for the diagnostics. So as -- let me first start with that. We’ve had a really robust strategy in relationship with developing the diagnostic, which started years ago when we actually first initiated the UpRi development.

So it’s really been in parallel on this entire process. And so earlier this year, actually, about a month ago, we had the webinar relationship to declaring what is going to be our cutoff for the identification of the higher and the lower NaPi2b patients.

And so not only that, but diagnostic in relationship to the potential commercial diagnostic was announced. And so both that diagnostic assay, as well as the applied cutoff will be utilized in our pivotal strategy of UPLIFT.

And as a reminder, that’s a two shot on goal and so we’re enrolling all patients and not preselecting for higher or lower NaPi2b patients. And so that will obviously speak to the efficiency in getting those patients on. And then they will be in a prospective, retrospective analysis determined to be high or low.

And utilizing that, we would then validate the cutoff, as well as the diagnostic assay. This is specifically addressing your question as far as the next steps of the diagnostic assay itself.

So using the UPLIFT cohort, we’ll be able to validate the cutoff and lead us to the potential outcome of either having a complementary diagnostic, whereby UpRi would potentially be indicated in a broad population, but having a diagnostic available in order to then complement or as a complementary diagnostic in regards to enriched activity or it would be a companion diagnostic in a scenario where only those patients with higher NaPi2b status would be eligible for a potential treatment with UpRi.

And so that speaks to the next paths in relationship to the validation of our potential commercial diagnostic assay..

Wonderful. That’s incredibly helpful. Thank you so much. And then might you be able to comment a little bit on the agreement with the potential diagnostic partner.

Do you have an exclusive agreement there or are you able to work non-exclusively with multiple companies on the development of the diagnostic?.

Maybe I’ll take this, Arvin. We’ve been working with Leica, a company that has a broad installed base of machines to do these tests all over the world and we’ve been working with them for several years to develop to bring the program to this stage. The relationship, however, is not exclusive.

So if at some point in the future, we wanted to expand even further, we could do that. But we’ve had a multiyear relationship to bring the program to this point and we selected Leica because of their broad global infrastructure..

That’s fantastic. Thank you so much for elaborating. That’s all from us..

And I’m not showing any further questions at this time. I would now like to turn the call back over to Anna Protopapas for any closing remarks..

I just want to thank all of you for joining us this afternoon. We’ve made significant progress in advancing UpRi with the initiation of UPLIFT and the soon to be in Q3 initiation of UPGRADE. We’re also making significant progress in advancing the pipeline with UpRi in lung, XMT-1592 and our two new first-in-class molecules in IND-enabling studies.

So we are on track to achieve our goals for this year and position the company for an important 2022. Thanks for joining and we look forward to updating you in future calls. Thanks..

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect..