Good morning, and welcome to Mersana Therapeutics' First Quarter 2024 Conference Call and Webcast. [Operator Instructions] I would like now to turn the call over to Jason Fredette, Senior Vice President, Investor Relations and Corporate Communications. Please note, this call is being recorded. .

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 our platforms, product candidates, business strategy, clinical trial execution and data, business development efforts 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 annual report on Form 10-K filed with the Securities and Exchange Commission on February 28, 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 President and 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 our discussion. .

Thank you, Jason, and good morning, everyone. As most of you know, Mersana is an ADC innovator that's advancing product candidates based on its 2 proprietary platforms. The first of these is Dolasynthen, our next-generation cytotoxic ADC platform and the second is Immunosynthen, a novel platform that utilizes a STING agonist payload.

Let's begin today's call with a brief discussion of new insights about Dolasynthen that we recently shared at both ESGO and AACR. As many of you know, severe neutropenia, peripheral neuropathy and ocular toxicity have served as key limitations for today's leading ADC platforms.

At those congresses, we presented preclinical and clinical data that we believe demonstrates Dolasynthen's ability to significantly reduce these types of off-target platform-related toxicities as well as other presumed platform-related adverse events that we saw with our own first-generation ADC platform, Dolaflexin. .

Ultimately, our goal is to reduce ADC platform toxicities to the greatest extent possible in order to both maximize monotherapy efficacy and open the door to combination approaches with other chemotherapy and ADC standards of care. That's something that simply isn't possible with many of today's approved ADCs.

Now let's move on to XMT-1660, our lead Dolasynthen ADC that targets B7-H4. We're in the midst of a Phase I clinical trial that's enrolling patients with solid tumors, including triple-negative and ER-positive breast cancer, ovarian cancer and endometrial cancers. B7-H4 is a member of the B7 family of immune checkpoint markers.

The scientific literature suggests that B7-H4 is selectively expressed in tumors with limited healthy tissue expression. Additionally, we have not seen any clear signs of on-target toxicities in the clinical data presented by our competitors.

We believe B7-H4 selective expression and Dolasynthen's ability to reduce off-target platform toxicity have helped us continue advancing the dose escalation portion of our ongoing trial. We are now beyond the dose levels previously investigated clinically with either Dolasynthen or our first-generation platform.

And we still have not established a maximum tolerated dose for 1660. Based on preclinical models, we have identified exposure thresholds that we believe are key to clinical activity. We also have leveraged our clinical data for 1660 to identify doses and schedules that increase the time above this exposure threshold. .

Additionally, based on emerging data in the B7-H4 space, we also are progressing our biomarker strategy in preparation for expansion and later stages of development.

Given that a maximum tolerated dose has not yet been established and objective responses have been seen in this trial, we are continuing to advance dose escalation and backfill cohorts in parallel to optimize our dose, schedule and biomarker.

We now expect to be in a position to announce our initial clinical data and initiate expansion in the second half of this year. All of this work is aimed at positioning XMT-1660 as a potential best-in-class asset, and we are taking the time needed to accomplish our objective. .

Now let's shift to XMT's 2056, which is the lead candidate we are developed utilizing Immunosynthen. Our Immunosynthen platform is designed to deliver a one-two punch by activating STING in a target-dependent manner in both tumor cells and in tumor-resident myeloid cells.

XMT-2056 is an ADC targeting a novel epitope of HER2 that's distinct from both pertuzumab and trastuzumab. So in addition to its potential as a monotherapy, we believe there may be a range of intriguing paths to pursue for combination treatments with 2056, including combos with other HER2-targeted agents.

That said, our near-term goal is to advance the dose escalation portion of our Phase I clinical trial of 2056. .

Multiple clinical sites are now open and we're actively recruiting patients with a range of HER2-positive tumors, including breast, gastric, colorectal and non-small cell lung cancer.

In addition to these lead programs, we also continue making progress with the collaborations we have in place with Johnson & Johnson focusing on Dolasynthen ADC discovery efforts and with Merck KGaA for immunosynthen discovery efforts. .

With that, let's turn the call over to our Chief Operating and Financial Officer, Brian DeSchuytner, to provide a financial update. .

Thank you, Marty. Let's get into the financial highlights for the first quarter of 2024, starting with our balance sheet. We ended the first quarter with $183.1 million in cash, cash equivalents and marketable securities. We continue to expect our available funds to support our operating plan commitments into 2026.

Please note that our cash runway guidance does not assume any potential milestone payments from our current collaborations or proceeds that we may realize from future collaborations. Turning to the income statement. Collaboration revenue for the first quarter of 2024 was $9.2 million compared to $7.8 million for the same period in 2023.

The year-over-year change was primarily related to the timing of research and CMC activities for the Johnson & Johnson collaboration agreement. Research and development expenses for the first quarter of 2024 declined significantly to $18.7 million compared to $47.3 million for the same period in 2023.

For the recent quarter, approximately $2.5 million of this spending was related to noncash stock-based compensation.

The year-over-year decline in R&D expenses was primarily related to reduced costs associated with manufacturing and clinical activities for UpRi and reduced employee compensation following the restructuring we announced in July of 2023. .

General and administrative expenses for the first quarter of 2024 declined significantly to $11.6 million compared to $18.3 million during the same period in 2023. Approximately $2.1 million in noncash stock-based compensation expenses were included in G&A for the most recent quarter.

The year-over-year decline in G&A expenses was primarily related to reduced consulting and professional fees and reduced employee compensation expenses following our restructuring. Please note that this restructuring is now substantially complete with no meaningful costs incurred in Q1.

And finally, Mersana's net loss for the first quarter of 2024 was $19.3 million compared to a net loss of $56.2 million for the same period in 2023. That concludes our business update. Operator, would you please open the call to questions from the audience. .

[Operator Instructions] The first question comes from Tara Bancroft of TD Cowen. .

So I was hoping you could reiterate or remind us of your expectations for the 1660 data? And what exactly you think the bar is? And has that changed at all over time, especially with now the data going from midyear to the second half?.

Thank you, Tara. We're not providing any specific details about what will be included in the initial data set. One thing we'd like to remind you that we are in this very competitive environment with a few other B7-H4, ADCs in clinical development.

That said, we do anticipate that these data would provide preliminary but meaningful efficacy data as well as safety, tolerability. And in addition, we are looking into our biomarker data as well so that we can clinically characterize the data set, and that would be for the totality of the dose escalation as well as backfill populations. .

[Operator Instructions] The next question comes from Kaveri Pohlman of BTIG. .

Can you may just provide any additional color on what your decision to move the time line data release to the second half? And I would also appreciate if you can tell us of how you're making decision on backfilling cohort.

Is it based on the PK/PD profile alone? Are you planning to do high doses to go there to define MTD dose and/or you'll be selecting optimal dose based on the safety and PK/PD data alone? Also, will you be defining your optimal dose during the update. .

I think I got all your questions. I'll try to do them in the order, but please remind me if I don't capture one of them. With regards to the time line, I think we -- one of the challenges of when you set out guidance on dose escalation studies is you don't know exactly the timing of how many doses you're going to go.

And we still have not established an MTD for 1660. The other thing is, what's I think becoming more apparent for ADCs is we're spending a little more time on optimizing schedule as well as dose. And each of those requires additional cohorts.

So I think as we've seen with Project Optimus and these others in oncology recently, we really want to optimize our dose and schedule before we go into expansion. With regards to the backfill question, that is based on -- we have the flexibility to enroll specific tumor types in backfill once we've cleared that dose level.

So we're not doing it based on any specific PK/PD, I would say, but it's more about making sure we have reasonably sized data sets for some of the tumors of interest and as well as an opportunity to make sure we have enough patients to feel confident in the dose because while your core design is kind of 3 plus 3, you like to have more patients than that at any given dose level to really get comfortable with the recommended Phase II dose.

With regards to your question on the high dose, that's still TBD. I mean we are going to continue to escalate to explore, but we have not established an MTD, but I think as to whether we will formally establish an MTD will be based on the evolving data. .

The next question comes from Jonathan Chang of Leerink Partners. .

This is Dylan Drakes on for Jonathan. So you previously outlined some tumor types the competitors have seen efficacy in B7-H4. Do you still view those as potential expansion indications? Or do you have any further thoughts around where you plan to initiate expansion cohorts? And then a second one, if I can.

You guys also mentioned previously and again today on the call that the improved safety profile that you guys are seeing with 1660 may enabled potential combination therapies.

Do you have any additional thoughts on what that could look like or where you look to evaluate that?.

Let me start on the tumor type question. At this point in time, we have not shifted the tumor types. We -- the one -- the 4 tumor types of most interest to us because they have the highest level H4 friction remain triple negative breast cancer, hormone receptor positive breast cancer, endometrial and ovarian cancer. Those are the tumor types.

We're still focusing on an escalation and in our backfill, and those are the tumor types that we would focus on for expansion. What we haven't provided any further detail on is exactly -- while we're guiding that we're going to initiate expansion in the second half, we are not going into the details of which tumor types exactly with.

But the goal will be -- but we will be initiating at least one of those expansion cohorts in the second half. .

With regards to your second point about the safety profile, I think we'd like to remind you, and this is what we're very pleased with the Dolasynthen data was we avoid the neuropathy and neurotoxicity and the ocular tox, and the neuropathy is a particular interest.

For example, if you were wanting to combine with a platinum-based chemotherapy, you can't do that if you have an ADC that causes neuropathy, given the data we've shown to date with UpRi as well as 1592 for our NaPi2b's, we're not seeing evidence of meaningful peripheral neuropathy, which would, in theory, allow us -- or potentially allow us assuming 1660 replicates that to combine with platinum.

We're also not seeing profound myelosuppression. So if you think about that potential combinations in breast cancer with Trodelvy are something that we could consider that would not be positive with a myelosuppressive ADC. So those are just the 2 couple of thoughts on combinations. .

[Operator Instructions] Our next question comes from Brian Cheng of JPMorgan. .

Can you elaborate on your prepared comments related to optimizing efforts behind schedule and biomarker for 1660.

How far are you today from identifying optimal schedule? And are there any specifics on the gating factor that you can provide before moving to those extensions?.

What I think is important is we are still in dose escalation, not established an MTD. We -- one of the reasons we mentioned that we were seeing objective responses, we did want to make it clear that we are in clinically relevant dose ranges. And so now it's a matter of getting that dose in schedule right. And I think that is the focus.

We do have a better understanding of our PK than we had previously on the evolving data. And as the other thing we kind of highlighted is there's this concept of understanding exposure over time is important. And if you kind of put those 2 together, it's how do you get that just right.

And that's really our focus over the next cohorts that we're studying to prepare so that when we come out with the data set, we have a high degree of confidence in not only the dose but also the schedule. .

The next question comes from Michael Schmidt of Guggenheim. .

Yes, just a follow-up on 1660. I guess, is there PK different from what you had expected? And are you surprised that you're not yet seeing MTD? I think last time you said you were in dose level 7. You're obviously far into the active dosing range at this point.

But I'm just curious if there's anything unique going on or if this is just part of the regular Project Optimus workflow that has to be done. .

I don't think there's so much anything unique. I think one of the things was we had gotten with 1592, our NaPi2b Dolasynthen, we have hit dose-limiting ILD at 56 milligrams per meter square. As we've told -- as we stated last time, we're over that now.

So we're at dose ranges that we haven't been before, and that always -- you always want to be careful when you're into new dose ranges on a platform.

And I think the other thing is we've always been confident in our PK, as we've stated before on our previous molecules, we haven't provided data on 1660 but we do see antibody-like half-life for our molecules.

And I think when you take that into account, trying to understand what is the optimal schedule to get the right exposure, it's some fine-tuning. .

And to your final point on Project Optimus, that is a factor because I think historically, we would have been very comfortable just get a dose you're comfortable with, go straight into expansion. And if you have to change the dose, you did.

I think in this current environment, we want to have a higher degree of confidence in the recommended Phase II dose that we take into expansion. So I think it is just a little bit -- and this has been a -- for lack of a personal growth for myself is appreciating the more time and energy on dose optimization than historically we did. .

Yes. No, I think that makes sense. And I think other companies have also looked at multiple different schedules before selecting NaPi2b.

Can you comment -- so is it every 2 weeks, I think, in the Phase I? And what are you looking at as alternatives?.

What we previously disclosed is every 3 weeks or every 4 weeks, but the protocol has given us the flexibility to look at alternatives, which we are currently doing. .

And then, yes, when we look at the Pfizer data that was recently presented at their R&D Day, they obviously saw some very nice enrichment of activity in biomarker-positive patients in triple-negative breast cancer. I think it was almost twice the response rate in positive patients.

And so I'm just curious what your approaches might look like for biomarker development. Would you look at a similar, I think, they use an IHC based assay? Or are there any other things that you could consider to enrich for biomarker expression. .

Yes, maybe I can take that. That's a great question. We're currently working on our biomarker strategy. And we've not made any final decisions about it at this stage. We're enrolling patients regardless of biomarker status. To ensure we fully understand the relationship between B7-H4 expression and the probability of response.

So in other words, we are retrospectively running an IHC test to establish B7-H4 expression levels. But we think this will be an important part of the development program to really nail that. .

Our next question comes from Asthika Goonewardene of Truist. .

So previously, what Michael just asked about as well about dose level 7 or 59 mgs per meter square. That was around here in Q1 this year.

So let me be direct and just ask how many dose levels above that, have you reached right now today in patients? And then Marty, you said that you've seen confirmed responses, have you seen this in more than 1 dose cohort?.

We're not getting into the details of either dose levels or the response data. I think it is responses. We did make sure we emphasize that. But I do think -- when you start looking at dosing schedule, focusing purely on an exact dose number becomes a little less relevant because what you're looking at is the total dose intensity of the regimen.

And there's ways you can dial that both from not only the actual dose you administer, but the frequency with which you administer it. So I think what's important is we are looking at more dose-intense approaches to the dosing schedule. But we're not getting into the details of exactly what those are.

And part of that is this is something that is a fairly competitive space and understanding ADC dosing schedule is a competitive issue. .

Got it. Okay. And so should I read that since you've already tried Q3W, Q4W, you might be looking at some of the other more creative approaches like Q2W or 2, 1 one-offs.

Is that how we should be thinking about it without getting into specifics?.

Yes. We're really not getting into more specifics, Asthika, I'm sorry. So yes, we're just not going there at this stage. .

[Operator Instructions] Our next question comes from Ashiq Mubarack of Citi. .

I think you already addressed my first one, which is just to confirm that the biomarker you're looking at is a B7-H4 biomarker based on IHC. I'm assuming that's correct versus maybe something else.

Assuming that's correct, I mean, where are you in the development of an assay? Is that something that's been established? Or is that something you're building from the ground up and how robust do you think that asset might be?.

We're not getting into the details of our specifics of the biomarker. It is IHC. I think we've confirmed that.

But -- what I think we can say is one of the reasons we are taking a little more time in dose-escalation and optimization in addition to the optimizing dose is it does allow us to generate a larger data set of patients in which we can further understand the biomarker to define such as what is the right biomarker, what is the right cut point, et cetera.

So these patients that we're using for dose escalation backfill are helping us understand that as we go into expansion and pivotal studies. .

Okay. That's very clear. And then one more on the sequence of events in the second half of the year. I think before the plan was to announce the initiation of the expansion cohorts and then share the data.

Is that still your thinking? Or is this all going to be kind of at once now in the second half of the year?.

Yes. We haven't predefined that. So really, the guidance that we've shared for both entering expansion and sharing clinical data, we're just going to leave it at second half for the time being. .

[Operator Instructions] Our next question comes from Colleen Kusy of Baird. .

Are you able to clarify whether the multiple responses you're seeing are in one or multiple tumor types? And then can you just confirm whether the biomarker data will be in the second half data update?.

Yes. So Colleen, we're not going to give more specifics than what we've already shared on responses. And in terms of the biomarker, I would say we're not going to commit to that today. It's something that we're looking very closely at. But that decision will be made at a later date. .

Understood.

And then for the expansion cohorts, would you plan to run multiple dose levels for an expansion? Or would you select just one?.

At this point in time, that's still TBD. The protocol gives us the option of multiple doses. And I think that will really I think in the Project Optimus environment, at some point in time, you are going to have to study more than one dose, the exact timing of when you do that is something that is flexible, and we will be considering it.

I think -- but we do have the option should we feel we need to do that expansion, we can. .

The next question comes from Asthika Goonewardene of Truist. .

Just one quick one. What's the most important next step right now? Is it pushing to a higher dose level or optimizing exposure? I think you kind of alluded to this already, but I just want to confirm. .

I think it's an element of both, but really, it's -- from our point of view now as we better understand how our drugs work, it is this focus on exposure and really getting an optimal dose that we're confident in that when we take it into expansion, we're not going to have to further modify the dosage schedule.

That's -- ultimately, that's really what's most important. .

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 have several investor events that are taking place over the next several weeks, including we'll be at Cowen Oncology Summit as well as at the Goldman Sachs Healthcare conference. We hope to see some of you there. And that includes the call, operator. Thank you. .

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..