Mersana Therapeutics, Inc.

Thank you for your patience, and please continue to stand by. The Marsana Therapeutics fourth quarter and year-end 2021 conference call and webcast will begin momentarily. Thank you for your patience, and please continue to stand by. Thank you. Good morning and welcome to Mursana Therapeutics' fourth quarter and year-end 2021 conference call and webcast. Currently, all participants are in listen-only mode. There'll be a question and answer session at the end of this call. I would now like to turn the call over to James Salerno, Associate Director, Investor Relations. Please proceed.

Good morning.

Welcome to Mursana's fourth quarter and year-end 2021 conference call. Earlier today, we issued a press release reviewing our fourth quarter and full-year financial results and business updates, which will be covered on this call. A replay of today's call will also be available on the Investors and Media section of our website. After our prepared remarks, we will open up 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, including with respect to the company's business strategy and the design, progression, and timing of its clinical trials or preclinical studies and the release of data from those studies, the ability of the single-arm uplift cohort to enable registration, the development and potential of our pipeline of innovative ADC candidates, the commercial opportunity of our product candidates, expectations regarding future clinical trial results, including with respect to the timing of the commencement of future disclosures, and the sufficiency of the company's cash on hand and funds available through its debt financing agreement with Oxford Finance and Silicon Valley Bank. Each of these forward-looking statements is subject to risks and uncertainties that could cause actual results to differ materially from those projected statements. These risks and uncertainties are discussed in the company's quarterly report on Form 10-Q, filed on November 9, 2021, and subsequent filings with the Securities and Exchange Commission, which are available at www.sec.gov and on our website at www.mursana.com. 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'll turn the call over to Annapurna Papas, Mursana's President and Chief Executive Officer.

Thank you, James. Good morning, and welcome to our fourth quarter and full year 2021 Corporate and Financial Update Call. Joining me today with prepared remarks are Arvind Yang, our Chief Medical Officer, and Brian Descheidner, our Chief Financial Officer. I'm also joined by the rest of the executive team who will be available for your questions. At the beginning of the year, we outlined our strategy of building a leading ADC company with a focus on the opportunity to benefit patients and shareholders. That strategy consists of four pillars. Building UPRI into a foundational therapy in ovarian cancer, building out our pipeline of highly impactful cancer medicines, building innovation and scientific leadership in ADCs, and building Mursana with a strong financial position, top talent, and as a strategic partner of choice in the ADC space. Let me start by describing the progress we have made executing upon our first strategic goals. building UPRI into a foundational medicine for patients with ovarian cancer. UPLIFT, UPNEXT and UPGRADE, the three ongoing clinical trials that, taken together, provide the roadmap for achieving this objective, all remain on track. As a reminder, UPLIFT is our single arm registration trial in platinum-resistant ovarian cancer. UPLIFT remains on track to be fully enrolled in the third quarter positioning Mersana for a 2023 readout and a potential BLA filing. Uplift provides two shots on goal, with the first being the potential in the two-thirds of the population that are nappy to be high, where we expect to see enriched outcomes, and the second shot on goal being in the overall population. Up next is our Phase III trial of Uplift Monotherapy Maintenance in NAPI-2B high recurrent platinum-sensitive ovarian cancer. UpNext is also on track to initiate enrollment in the second quarter of this year and has the potential to serve as a confirmatory trial in support of global registration, positioning UpRe as the next novel targeted agent and the first ADC to launch in the platinum-sensitive space. An upgrade is our Phase I to Umbrella trial, evaluating the combination of Opri with carboplatin, followed by continuation of Opri monotherapy. We anticipate disclosing interim data from the dose escalation portion of the upgrade trial in the second half of this year. This trial has the potential to generate proof-of-concept data that could impact the standard of care in platinum-sensitive disease. by replacing pacotaxel with UPRI with the potential to improve efficacy, durability, and treatment duration, and as a result, patient outcomes. We believe that the UPRI clinical data we've shared to date has demonstrated a robust efficacy and a differentiated durability profile without the severe neutropenia, neuropathy, and ocular toxicity seen with other ADCs. giving us confidence in our ability to execute on both a successful uplift registration trial and a potentially robust commercial launch. We believe that together, the uplift, upnext, and upgrade trials have the potential to generate data to enable us to bring upgrade to the largest number of ovarian cancer patients in the most expeditious manner. 2022 will also prove to be a pivotal year in executing against our strategic goal of building out our pipeline of highly impactful product candidates. XMT1660, our dollar synth and ADC targeting B7H4, and XMT2056, our first immunosynth and stink agonist ADC targeting a novel epitope of HER2, are both on track to enter the clinic in mid-2022. IND-enabling studies are substantially completed for both molecules, and the emerging clinical data continue to validate our plan to advance these candidates into the clinic. Finally, we continue to explore the dose for XMT1592 and remain on track to make a data-driven decision in the second half of this year. incorporating learnings from APRI on the role of NAPI to be in non-small cell lung adenocarcinoma and the competitive environment. The excellent performance we've observed from APRI in ovarian cancer and the multiple investment options in our pipeline set a high internal bar for continuing to allocate capital to this program. Furthermore, with respect to the third strategic goal of building on our legacy innovation and scientific leadership in ADCs, we are pleased with the progress of our three platforms, Dollar Flexi, Dollar Synthet, and Immunosynthet, serving as capital-efficient product engines for generating new and potentially impactful ADCs. We have multiple early stage discovery programs at or near development candidate stage. We recently announced two new development candidates based on our immunosymptom platform, XMT 2068 and XMT 2175. We look forward to sharing more details about these two new programs and other innovations with you over the course of the year. As the data supporting all three of our ADC platforms continue to mature, strategic partnerships are emerging as a key component of our strategy of building MERSANA. Large pharmaceutical companies with a significant presence in oncology have been recognizing that ADCs are a critical modality in their toolkit for pursuing novel biological targets. All three of our platforms, supported by substantial data, serve as capital-efficient product engines that allow us to quickly and very cost-efficiently generate new development candidates for our collaborators. Note that all three of these platforms are expected to be in the clinic generating data this year. These collaborations may not only expand Mursana's external pipeline, but could also bring substantial financial contribution for redeployment in our own business. To this end, earlier this month, we announced a research collaboration and license agreement with Janssen Biotech, which allows them to use dollar sensors to discover, develop, and commercialize novel APCs against three exclusive targets. Janssen's collaboration with Mursana followed a thorough evaluation of our preclinical and clinical data and our robust clinical-scale GMP manufacturing processes. This is one of the largest-ever ADC collaborations of its type and includes a $40 million upfront payment, cost reimbursement, meaningful near-term milestones, the potential for more than a billion in total milestones, and mid-, single-digit to low-double-digit percentage royalties on net sales of the resulting products. Finally, as Brian will outline, we're in a strong financial position and have the resources to fund our operating plan into the second half of 2020. This is a truly exciting time at Mursana as we execute an uplift first and foremost, advance our clinical development with uplifts and upgrade, continue to dose explore with XMT 1592, and bring our newest candidates XMT 1660 and XMT 2056 into the clinics. We believe that this, together with our partnership opportunities, all strengthen Mursana strategically, organizationally, and financially. I will now turn this over to Arvind Yang, our Chief Medical Officer.

Thank you, Anna. We continue to make substantial progress in advancing UPRI across the ovarian cancer treatment landscape through our broad development program. We have strong support from both the GOG and MGOT, both in the U.S. and in Europe. We are on track with initiating enrollment in UpNext, a randomized placebo-controlled phase three trial in the second quarter of this year, and continue to gather data on upgrade our phase one-two combination trial with carboplatinum. And we expect to be in a position to share interim combination data in the second half of the year. We remain on track to complete uplift enrollment during the third quarter and stand poised to deliver the data in the first half of 2023, with the potential to support approval in platinum-resistant disease. As was outlined in our press release, we look forward to sharing our expansion cohort data at the SGO conference next month. We previously disclosed data from a June 10, 2021 data cut from almost 100 patients with ovarian cancer enrolled in the expansion cohort of the UPWE Phase I study. Analysis of that data supported our decision to select 36 mg per year squared as the recommended phase two dose for uplift. The SGO presentation and poster will provide more details from that same data cut in a medical forum. Specifically, we will provide the details of an analysis which bifurcated patients that received an effective dose of 36 mgs per meter squared and those that received an effective dose of 43 mgs per meter squared, increasing our sample size at the lower dose. This analysis reaffirms what we communicated at the September investor event. that 36 minutes per meter squared appears to have fewer grade three and higher adverse events, fewer adverse events in general, no high grade pneumonitis events, and fewer discontinuations, including discontinuation before the first scan. Beyond Opry, we are really excited to advance XMT1660 and XMT2056 into the clinic mid-year. The preclinical data generated by our research team continues to support the robust activity of these two diverse molecules. Both molecules offer the potential to address areas of high medical need, as XMT1660 has promise in breast, endometrial, and ovarian cancer, while XMT2056 has potential in high and low HER2-expressing tumors, including breast cancer, gastric cancer, and non-small cell lung cancer, consistent with our non-clinical data. We are engaged with the investigator community as we finalize the Phase I designs, and we will be able to share our plans in the near term. With these two assets entering the clinic, we are in the exciting position to have all three of our platforms generating clinical data this year. With that, I will turn the call over to Brian for an overview of our financial results.

Thank you, Arvind. Good morning, everyone, and thank you for joining us. We have summarized our fourth quarter and full year financial results in the press release, and therefore I'll only discuss key financial highlights on this call. Net cash used in operating activities in the fourth quarter was $42 million. Actions we have taken in the fourth quarter and in the first two months of 2022 have put us in a strong position to advance our pipeline through several important value-creating milestones. We ended 2021 with $178 million in cash and cash equivalent. In the first two months of 2022, we raised $40 million from Janssen and $46 million through strategic use of our ATM with substantial participation from existing long-term investors. In October 2021, we signed a new credit facility with Oxford SVB for up to $100 million on favorable terms with no financial or liquidity covenants And we drew down $25 million at signing and have another $35 million available to us at our option with the balance available upon achievement of certain pipeline and up-re development milestones. Our year-end cash balance plus the additional cash of $86 million and the additional $35 million available from the credit facility at our option represents a combined amount of approximately $300 billion in capital, which we expect will fund our operating plan commitment into the second half of 2023. Additionally, continuing to execute on our business development strategy will not only create strategic value, but will further enable us to extend our runway with non-dilutive capital and new partnerships around potentially impactful cancer medicine. Furthermore, execution of our operating plan would provide us access to near-term milestones from the Janssen Collaboration, and the additional tranches from our line of credit, which combined have the potential to extend our runway even further. I will now turn the call back to Anna.

Thank you, Brian. We have another busy year ahead of us with many important anticipated goals and milestones. As we look to the year ahead, we believe we're well positioned to continue to deliver meaningful progress on our four strategic pillars. as we expect Uplift, our single arm registration trial, to be fully enrolled during the third quarter. Up next, our first phase three trial to initiate enrollment in the second quarter. Upgrade to be charting the path for upbringing combination with other ovarian cancer therapies with interim dose escalation data to be disclosed in the second half of this year. and XMT 1660, XMT 2056 to be in the clinic in the middle of the year and to make a decision on XMT 1592 in the second half of the year. We remain focused on our goal of establishing UPRI as a foundational therapy in ovarian cancer and creating value for patients and shareholders by addressing significant unmet medical needs. We believe XMT 1592, 1660, and 2056 have the potential of addressing substantial market opportunities and making a real impact on patients. Beyond UPRI and our robust pipeline of promising ADC candidates, our technology platforms continue to serve as capital-efficient product engines, providing a strong foundation in support of our partnership strategies. We are well positioned to transform Mursana into a commercial stage company with a deep pipeline of innovative molecules. We look forward to executing on these plans and keeping you posted on our progress as we continue to strive to create substantial value for patients and shareholders over the months and quarters ahead. With that, I will turn the call over to the operator for Q&A.

If you'd like to ask a question, please press star then one. If your question hasn't answered, you'd like to move yourself in the queue, press the pound key. Our first question comes from Jonathan Chang with SVB Lyric. Your line is open.

Good morning, and thanks for taking my questions. First question, can you discuss how you're thinking about business development and your cash position moving forward?

Yeah, Brian will take that call.

Sure. Absolutely. So, obviously, we feel like we're in a very strong capital position. Business development would serve to supplement that, and there are really three pillars to the business development strategy. The first is the cytotoxic platforms, and you saw what we can do there with the Janssen deal. You know, for us, we fully scaled up our cytotoxic platforms. That means we can get from a partner antibody to an IND in a very short period of time, and that brings in non-dilutive capital. In fact, the Janssen transaction, as Anna pointed out, was the largest transaction of its type, the largest ADC research collaboration and license. The second pillar of the business development strategy is really around the immunosynthin platform. For companies that have targeted modulation of the innate immune system in their strategic sweet spot, we've got a lot of interest in that platform as well. I think from a platform access perspective, that might look rather similar to the Janssen deal. There are obviously six immunosynthin molecules that we've developed up to various stages, and partnerships could also be used to advance more of those molecules faster to patients. And then the third component of the business development strategy might be around the NAPI 2B assets. There we would be very hesitant to do a deal that would cap the upside. We think we have the financial resources to get through the next several value inflection points on our own, but we may consider transactions on a regional basis, parts of the world we wouldn't go to on our own, like Asia. Annika?

I was going to add that I think a trend we're seeing, Jonathan, is that Large pharmaceutical companies in the oncology space are really showing an interest in adding ADCs as part of their toolbox. And we're finding ourselves in a good position because we've invested in innovative platforms. We have substantial clinical, preclinical data to support them. And as Brian said, of course, we also have scaled these up and have a very efficient process of going from a target to an IND.

Got it. And just second question, can you help set expectations for SGO? Thank you.

Arvind can take this call or question.

Thanks, Jonathan. So we're excited to be attending and presenting at SGO. What we'll be sharing are multiple posters. One is actually an expansion cohort from the ovarian data that we previously had the data cut that was shared on the June 10th of last year data cut. There what we've done is actually bifurcated the patients in such a way that There are essentially patients that received an actual 36 versus 43 dose, and they were reassured really in regards to our decision to move toward the 36 dose, recognizing that there were fewer grade three adverse events, fewer adverse events in general with the 36, as well as actually patients being able to stay through their first scan for a longer period of time. So we're excited to be attending SGO and presenting this information along with some additional posters.

Got it. Thanks for taking my questions.

Our next question comes from Boris Peeker with Cohen. Your line is open.

Good morning. I guess first I just want a general question. For the ongoing clinical studies that you have or the planned studies, is there any exposure that you have in Eastern Europe?

We do not. Most of our enrollment is happening in the U.S. and in Western Europe. We do not have any exposure in Ukraine.

Gotcha. I guess also in terms of the upper expansion study that you're going to be presenting, I'm curious, based on an observed side effect profile at 36 mg and maybe even more importantly at 43 mg per meter squared, are there any potential prophylactic protocols that you think can mitigate some of the tolerability or side effects that are observed for OPRI? Yeah.

So, of course, we've implemented many different things within the programs to really maximize the ability for these patients to maximize their treatment on study. And that includes, obviously, from the inclusion criteria to ensure that the patients are appropriately selected for. But in addition to that, obviously ensuring that prophylaxis is in place for potential toxicities associated with the drug. So across the board from the standpoint of prophylaxis, monitoring, and inclusion, we've been addressing those elements.

And I would add, Boris, that the benefit of having 100 patients in ovarian cancer and 200 overall is that we truly understand the profile of the agent and we understand how we could optimize that profile. Obviously, the dose adjustment is one. But the other refinements to enrollment criteria, management of patients all add to even further improving the profile.

I mean, keeping in mind that our platform doesn't have those toxicities associated with it, potentially with the ADC class, including the lack of severe ocular toxicities. And so obviously, you know, as far as the type of prophylaxis or management, certainly it would differ because of the lack of these type of side effects.

Got it. Great. Thank you for taking my questions.

Our next question comes from Colleen Cussie with Baird Capital. Your line is open.

Hi. Good morning. Thanks for taking our questions. So since you've implemented the changes to the enrollment criteria in the UPLIFT study, have you seen any changes in the rate of enrollment or heard any pushback from centers on the new enrollment criteria?

So, Colleen, the GOG and the NGOT, they're really excited and active in relationship to participation. And so we've actually seen that there's quite a lot of engagement in relationship to interest in participating and so forth. We're guiding still toward the Q3 as far as the complete enrollment of the study. So I would sort of offer up that there's excitement and, you know, we remain on track in relationship to enrollment.

I would also add, Colleen, and I think we mentioned it back in September, that when we shared the data in our decision to modify the dose from 43 to 36, a lot of the investigators that had treated, you know, patients said, this feels right. in terms of our experience in the clinic. And that was yet another sort of endorsement that we were in the right going, we're heading in the right direction.

Okay, great. Thank you. That's really helpful. And have you disclosed the dose you'll use and up next and then what the dose escalation strategy is for upgrade?

So when we initiate dosing, which we're on track to do in Q2, we'll be able to really disclose more details around that protocol. As for upgrade, we obviously started with the approved dose for carboplatin, but as is typical, started at a lower dose for UPRI and our dose escalating. And we are on track to have sort of an interim view of that study in the second half of the year.

Okay, that's helpful. If I can squeeze in one quick follow-up. For the upgrade combo study, how are you using the NAPI-2B biomarker in that study?

So, Carleen, we're not selecting for patients. So all patients are eligible to come on to the upgrade study. Obviously, we will be evaluating for their NAPI-2B status for the patients that come on to understand if there's differential benefits. But currently, we have an intention to treat all patients that are enrolled, regardless of NAPI 2B status.

Okay, great. Thanks for taking my questions.

Our next question comes from Kaveri Pullman with BCIG. Your line is open.

Yeah, good morning. Thanks for taking my questions. For the up next first line maintenance study, This is a unique trial, and most of these patients don't really have a lot of treatment options, but could you provide any insight into what PFS you can get from the placebo arm here?

Yeah.

Sure. Yeah. I couldn't hear you too clearly, but I think you were asking a question just in relationship to the performance of the placebo arm. Yeah, so just to give you context exactly to your point, it's a high unmet need population. These patients currently have really no treatment options available to them. And so to that end, I mean, the best comparison is the available relapsed platinum-sensitive maintenance settings, including NOVA and Study 19, where the placebo arms were offering progression-free survivals in the four- to five-month range, just to give you context in relationship to the limited benefit or progression-received survival these patients will have, and keeping in mind that these studies were performed earlier. So they're actually in a less heavily pretreated population that would exist actually current day as we come on to study.

It did not include stable disease.

That's right. And then certainly from the standpoint of the unmet need we've talked about previously is the standpoint that include stable disease patients where there are actually no approved therapies available to them in the maintenance setting.

That's helpful. Thank you. And my second question is also related to the maintenance study. You're selecting patients for not P2V expressions. But the uplift study is testing not P2V low patients also. Can you elaborate your strategy for patient selection? I mean, if the data from the uplift study are positive for not P2V low patients, could you get your label expansion without changing the up next study design?

Yeah, so we don't want to comment, obviously, on the regulatory potentials of up next without knowing the full context of what uplift approval will be. But keeping in mind that uplift could serve as a confirmatory study, in particular for the high NAPI 2B, you know, obviously we would have further discussions with regulators just in relationship to the potential for up next to support a broader confirmation.

Got it. Thank you.

Our next question comes from Jessica Phi with JP Morgan. Your line is open.

Hey, guys. Good morning. Thanks for taking my questions. The first one, just to confirm, the update at SGO in March will reflect a data cut from June 10th. Did I get that right? And if so, why not a more recent data cut?

Yeah, Jess. So it is representing the June 10th cut. And this was really an opportunity for us to actually go back and, as I was describing, bifurcate data set, really to give actually more robust numbers across both the 36 and the 43 to represent what they actually received. Really, as I was describing, to reinforce the decisions that we've made in relationship to the lower dose having that improved safety profile from the standpoint of the fewer grade three events and for patients to be able to be treated through the first scan, as well as the lack of the severe pneumonitis. And so that was the intent in relationship to the SGO presentation itself. The due intent data cut is otherwise mature, just from the standpoint of what we've presented. So just to give you context of the SGO presentation.

We will, as we completely bring down and the data completely matures on the expansion cohort, we will obviously publish it. But at this point, we wanted to continue to share data that gives us confidence on the selection of dose.

Okay. And next you're just for upgrade where I think we could get that interim data this year. What are the benchmarks to keep in mind when we see those results? I think you mentioned UPRI could replace paclitaxel in this carboplatin doublet. So how does carbopaclitaxel perform in this setting? And then last one, when you talk about a high internal bar to advance 1592, given the competitive landscape and your other investment opportunities, what is the bar for efficacy that you want to see with that product?

So do you want to take the first question, Arvind?

Oh, sure. Okay. Yeah, I mean, just – well, go ahead, Brian.

Sure, sure, sure. I mean, I have strong feelings about this. Okay. The most appropriate comparator here is the control arm of GOG213, which was the study that added BEV to platinum-based chemotherapy compared to platinum-based chemotherapy itself. The response rate in that study and in a similar study called Oceans was about 50%. It's worth keeping in mind, however, that that data was in the pre-BEV, pre-PARP era, and today patients are much more heavily pretreated. In addition, there's emerging evidence that prior PARP exposure reduces platinum responsiveness in subsequent lines, and so those are all important considerations in that setting.

Your second question was around our decision, our benchmark for non-small cell lung cancer. I think that a response rate, as we've said in the past when we were evaluating outreach, I think a response rate of around 30% would be a great benchmark to address because we believe that in that situation there are opportunities potentially for a rapid path to the market. I think anything below that might necessitate larger combination studies, which would be a pretty substantial financial commitment to go forward. And I think that's how we're thinking about the competitive landscape and our benchmarks. Thank you.

There are no further questions. I'd like to turn the call back over to Anna Potapapas for any closing remarks.

I'd like to thank you for listening to our call. We've had a very busy and exciting first two months of this year. and we expect to continue to execute on our plan and be able to bring you substantially more news over the rest of the year. Thank you.

This concludes the program. You may now disconnect. Everyone, have a great day.