Mersana Therapeutics, Inc.

Good morning, and welcome to the Mursana Therapeutics 3rd Quarter 2022 Conference Call and Webcast. Currently, all participants are in a listen-only mode. There will be a question and answer session at the end of this call. I would now like to turn the call over to Jason Frequette, Senior Vice President, Investor Relations and Corporate Communications. Please proceed.

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 include, but are not limited to, those related to the therapeutic potential of our product candidates and the potential of our platforms, business strategy, clinical trial design, initiation, execution, and data releases, regulatory plans and objectives, commercial opportunities, collaborations, and potential associated payments, operating expenses, 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 the company's quarterly report on Form 10Q, filed with the Securities and Exchange Commission on August 8, 2022, and in subsequent SEC filings. Our filings are available at sec.gov or 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. With that, let me turn the call over to Anna Protopappas, our President and Chief Executive Officer.

Thank you, Jason, and hello, everyone. Welcome to our conference call. Joining me today with prepared remarks are our Chief Medical Officer, Arvind Yank, and our Chief Financial Officer, Brian Descheidner. I'm also joined by certain other members of management who will be available to answer your questions. We have continued our forward momentum here at MERSANA with a number of significant accomplishments in recent months. Let's recap, beginning with the progress we have made in executing a comprehensive development plan to address areas of unmet need across the ovarian cancer landscape with UPRI. We achieved a major milestone last month with the completion of enrollment in UPLIFT, a single arm registration trial in platinum resistant ovarian cancer. We think it's noteworthy to point out that we were able to fully enroll this trial within just one year. We attribute this to three primary factors. First and foremost is the significant unmet need faced by patients with platinum resistant disease. Second is the high level of enthusiasm and engagement about UPRI among the investigators globally. And third is our team's strong execution. With UPLIFT fully enrolled, we are positioned for what we expect to be a robust top line data readout in mid 2023. and assuming that data are positive, a potential BLA submission by the end of next year. In addition to Uplift, we have commenced patient enrollment and dosing in UpNext, our phase three clinical trial of upper immunotherapy maintenance in NAPI to be positive recurrent platinum sensitive ovarian cancer, which we believe could support approvals outside of the United States. And then there is an upgrade A, our Phase 1-2 clinical trial enrolling platinum-sensitive patients for treatment with a combination of Opri and carboplatin. We are pleased to report that we are now nearing completion of the dose escalation portion of the trial. To date, 12 patients have been enrolled, a few of whom are still early in their treatment. Given the limited data set, We have opted against sharing data at this time. We expect to enter the dose expansion portion of upgrade A in the first quarter of 2023, and to present data that are more robust and mature in the second half of 2023. Beyond UPRI, we're excited to have began our phase one trial of 1660, our new dollar symptom product candidate, and we received fast track designation by the FDA for that candidate for the treatment of adult patients with advanced or metastatic triple negative breast cancer. Additionally, we recently opened our clinical sites and began screening activities for our phase one trial of XMT2056, our first immunosynthetic product candidate. Patient dosing is expected to get underway later this quarter. In parallel with our clinical pipeline progress, we also have continued to focus on innovation in research, leveraging our three highly differentiated platforms as product engines to generate new molecules that have the potential to address important unmet medical needs. Our platforms provide substantial opportunities for expanding our pipeline, either with wholly owned assets or through partnerships. The agreements we entered into with Janssen in the first quarter and GSK in the third quarter demonstrate our position as an ADC innovator and a partner of choice. And given the breadth of our assets and the interest in the ADC space, we see collaborations remaining a core part of our go-forward strategy. In summary, the Mursana team has made great strides across a number of key areas of focus with an uplift top-line data readout and potential PLA submission on the near-term horizon. Up next, an upgrade in motion to exciting and highly differentiated new NTCs entering the clinic and a balance sheet that's been strengthened through significant collaborations. I am very proud of what we've achieved thus far in 2022, and we have a strong foundation in place as we head towards what we expect to be a transformative 2023. With that, I will ask our Chief Medical Officer, Arvind Yang, to delve more deeply into our clinical progress and plans.

Thank you, Anna, and good morning, everyone. Let's begin with our UPRI development plan and our three ongoing trials within the ovarian cancer landscape. First, there's UPLIFT, our registrational trial in platinum-resistant ovarian cancer. In September of 2021, we announced that we would be utilizing a dose of 36 mgs per meter squared of UPRI in this trial. And within just one year, we enrolled approximately 270 patients in the trial, exceeding our initial target As a reminder, the design of Uplift provides us with two shots on goal. The first is the primary endpoint, which is the overall response rate, ORR, specifically in the MAPB2B positive population. And the second is the ORR in the overall population. While the analysis of patient biopsies is ongoing, we have confirmed that our minimum targeted number of MAPB2B positive patients for the primary endpoint has already been exceeded. Now let's turn to Opnext. are ongoing phase three trial and recurrent platinum sensitive maintenance. That is enrolled patients with NAPI-2B positive tumors and is designed to accomplish several important goals. First, it is intended to serve as the post-approval confirmatory trial of UPRI in the U.S. Additionally, UPNEXT is designed to support global registrations while also bringing UPRI into earlier lines of therapy. Since this trial is in the maintenance setting, where we are looking to keep patients on therapy to maintain disease control or remission for as long as possible. We're utilizing a 30 mg per meter squared dose of Uprate. We plan to enroll approximately 350 patients worldwide in UpNext. These include three types of patients who currently have limited treatment options. The first are those who progress on PARP inhibitors and Bevacizumab, whether taken in combination or in sequence, as these agents move to the earlier lines of therapy. it increases the number of patients who have already exhausted those options. Second are patients who are poorly served by today's maintenance agents, either because of biomarker status or tolerability issues, and are resorting to watch and wait as their best option. And finally, there are the patients who achieve stable disease on platinum, who were excluded from PARP maintenance studies and consequently are excluded from PARP labels. Now, let's move on to 1660 and 2056. XMT1660 is a DOLA symptom product candidate that targets B7H4 and is equipped with a precise target-optimized drug-to-antibody ratio of 6 and our clinically validated DOLA lock payload with controlled bystander effects. In August, we initiated a multi-center phase 1 trial investigating this candidate in patients with breast, endometrial, and ovarian cancers. We see B7H4 as a compelling target given its high tumor expression in these indications and its limited expression in healthy tissue. The initial dose escalation portion of the trial will evaluate the safety and tolerability of 1660 as a single agent and will be followed by dose expansion portion in which we'll assess objective response rate, duration of response, and other measures. And the next candidate will be entering the clinic is XMT2056. a HER2-directed immunosensin sting agonist in DC. As you may recall, 2056 targets a novel HER2 epitope and is designed to locally activate sting signaling in both tumor resident immune cells and in tumor cells. Preclinical data have shown its potential to have a significant impact on HER2 high and low tumors, both as a monotherapy or in combination with banded care agents such as in HER2. We expect to begin patient enrollment and dosing in our multi-center phase one open-label trial later this quarter. This trial will investigate 2056 in patients with previously treated advanced or recurrent solid tumors expressing HER2, such as breast, gastric, colorectal, and non-small cell lung cancer. The initial dose escalation portion of the trial will investigate the safety and tolerability of 2056 and will utilize the data to determine a recommended phase two dose and or a maximum tolerated dose. The dose expansion portion of the trial will continue to assess safety and tolerability, as well as the ORR, duration of response, and disease control rate. And so, we've made significant progress across our entire pipeline and will soon have molecules from all three of our ADC platforms in the clinic. Our focus from there on will be on patient enrollment and data generation. With that, Let's turn the call over to our Chief Financial Officer, Brian Beshanger. Brian?

Thank you, Arvind. We ended the quarter with $290 million in cash, cash equivalents, and marketable securities. Additionally, our line of credit with Oxford and SVP provides us with the opportunity to draw down an additional $35 million in low-cost capital at our option. We believe we currently have the funds required to support our operating plan commitments into the first half of 2024. It should be noted that potential milestones from our current collaborations or proceeds that we may realize from future collaborations could extend this runway even further. We continue to place strong emphasis on business development and view it as an important tool within our financing arsenal. The collaborations we entered into recently with Janssen and GSK are prime examples of how we can leverage our differentiated platforms in Canada and expand their reach while raising meaningful upfront capital. Given our past successes and the ongoing surge of interest we are seeing in the ADC space, we see the potential for further business development initiatives in the quarters to come. Now let's move on to our P&L for the third quarter. Collaboration revenue for the third quarter of 2022 was $5.6 million, compared to an immaterial amount for the same period in 2021. The year-over-year increase was related to the revenue recognized under our collaboration agreement with Janssen and GSK. Research and development expenses for the third quarter of 2022 were $50.6 million, compared to $35.3 million for the same period in 2021. Non-cash R&D-related stock-based compensation expense for the third quarter of 2022 was $2.9 million. Most of the year-over-year increase in R&D was driven by non-recurring costs related to upgrade antibody manufacturing process qualification locks. in preparation for a potential BLA submission, which we had guided to on our Q2 conference call. These costs are now largely behind us. Other drivers of the R&D increase included higher clinical costs for UPRI and XMT1660, greater costs related to manufacturing for XMT2056, and increased headcount. General and administrative expenses for the third quarter of 2022 were $14.6 million compared to $10.1 million for the same period in 2021. Non-cash G&A-related stock-based compensation expense for the third quarter of 2022 was $2.5 million. The year-over-year increase in G&A was primarily related to an increase in consulting and professional fees and increased headcounts. Mursana's net loss for the third quarter of 2022 was $59.8 million, or $0.61 per share, compared to a net loss of $45.5 million, or $0.63 per share, for the same period in 2021. And finally, net cash provided by operating activities was approximately $54.6 million for the third quarter of 2022. As a reminder, this includes GSK's $100 million upfront license option payment. Now, Anna, we'll close our formal remarks before we take your questions. Anna?

Thanks, Brian and Arvind. This already has been a very productive year. We completed enrollment in Uplift. We initiated our UpNext and XMT1660 clinical trials. We're bringing 2056 into the clinic, and we entered into two significant new partnerships. This positions us for what we expect to be a transformative 2023, highlighted by a top-line data readout from Uplift and our first potential BLA submission. Before we turn the call over to Q&A, I would like to extend a hearty thank you to all of our employees for their stellar work, while also extending our thanks to the patients in our trials and their families. And I would like to commend the clinical investigators we are working with in Uplift, Upnext, and Upgrade for their relentless patient advocacy and support as we aim to provide a much needed new ovarian cancer treatment option. With that, let's open the call to your questions. Operator, would you please provide the instructions?

Certainly. At this time, if you'd like to ask a question, please press star one on your telephone keypad. To withdraw the question, Please press star 1 again. We'll pause for a moment to compile the Q&A roster. Jonathan Chang with SVB Securities. Your line is open.

Good morning, and thanks for taking my questions. First question, on the uplift study, the press release indicates that the minimum targeted number of NAPI 2B positive patients has already been exceeded. And I'm trying to understand what this means. Is it a function of strong enrollment in the study overall and or other factors we should be considering? And are you able to tell us how many patients have had evaluable patient biopsies at this point?

So Jonathan, thanks for the question. The NAPI-2B scores evaluations are still ongoing. And therefore, we do not have the full number of NAPI to be high patients yet, but we wanted to confirm that that minimum 100 we were targeting, we have already achieved and exceeded, as you would expect from the overall prevalence of NAPI to be high we've seen to date.

Understood. Thank you.

Sorry, go ahead.

Was there a second part to your question, Jonathan?

Yeah, so the second question on the upgrade study, are you able to provide any color around how safety has looked in the limited number of patients to date?

As we mentioned on the call, we've enrolled 12 patients. A handful of them are still not yet evaluable, but based on what we've seen to date, We are planning to initiate the expansion cohorts in Q1 of next year, and we are very encouraged with combinability and the potential benefit of this combination. However, we do need to get a more robust and mature data set, and at that point, we'll be able to disclose the data externally.

Understood. Thanks for taking my questions.

Thanks, Jonathan. Calling CUSI with Baird. Your line is open.

Hi, great. Thanks. Good morning, and thanks for taking our questions. And congrats on completing the enrollment in the Uplift trial. Can you remind us what the bar for success is that you're looking for in the Uplift trial? And do you think, will that be solely based on ORR, or do you think duration of response or PFS will have any impact on your potential to get accelerated approval?

Good morning, Colleen. This is Arvind. So the bar for success as discussed with FDA is single agent chemotherapy with a maximum response rate of 12%. And as you know, these patients really have a significant unmet need in this space. And so the regulatory review, it will be based upon both the risk and the benefit. And the ORR is certainly the response rate or the numeric number by which the comparison would occur. But again, you would need to have the broader context of the safety profile as well as additional parameters to understand the duration of the benefit in order to do that risk-benefit analysis.

Okay, great. That's helpful. Thank you. For the upgrade study, can you speak to what dose levels you've escalated to and how many more dose levels you plan to explore before starting expansion?

Yeah. Colleen, we've evaluated multiple dose levels. I think we're going to hold off for details until we have that more robust and mature data set. But we have explored multiple data dose levels. And as I've said, we will be initiating the expansion cohort in Q1.

Great. Thank you. And one last one, if I can. For the ongoing 1660 study, can you speak to what your biomarker strategy will be there?

Sure.

So just to give you context, we are obviously evaluating D7H4 in the study per se, but we are enrolling all comers and disease types that have higher expression in relationship to B7H4 based upon what's known in the public databases. And so obviously we'll be pursuing and trying to understand if there are enrichment biomarkers that can serve to enhance upon that therapeutic index.

We're following very much the playbook we followed for UPRI where we did not select upfront but learned through the early phase one what the best enrichment strategy was.

Great, thanks for taking our questions.

Again, if you'd like to ask a question, please press star 1 on your telephone keypad. Kaveri Pullman with BTIG, your line is open.

Yeah, good morning, and thanks for the update. For the UpNEXT trial, can you talk about your rationale for selecting lower dose of 30 mg per m2? Is it something based on the data from the Pivotal Uplift Study?

Yeah, thanks for the call, Kaveri. And so we chose 30 milligrams meter squared for the up next study, in particular to continue to identify a dose that could control the disease, which is most relevant in that platinum-sensitive maintenance recurrent setting. This is as opposed to really in the platinum-resistant space where a treatment effect with a 36 milligram is the intent and the goal in order to shrink the tumor. And so we believe that we have the ability to then optimize the dose regimen in relationship to the disease phase.

That's very helpful. Thank you. And my second question, sorry, go ahead.

I think you also asked based on what data, and I think the answer is based on the holistic data of all the patients we have treated today, dose escalation, dose expansion, and of course uplift as well.

That's helpful. And the second question is also for our next study. Can you tell us what drove your interest in specifically targeting not B2B high patients? I mean, if you get activity in not B2B low patients from the uplift trial, will you be able to, and do you plan to amend the protocol to include those patients?

So let me start with, from the standpoint that not B2B is as highly expressed within ovarian cancer. And so from the data sets that we've described, it appears to be consistently expressed in the earlier line and in the late line setting. And so when we think about that target product profile for the maintenance setting, we want to ensure that we have the most optimized profile in relationship to that. And based upon the data sets that we've seen to date, it really indicates that NAPI-2B could serve as an enrichment marker in relationship to optimizing that risk or efficacy that's seen. And so that's the rationale in relationship to selecting for NAPI-2B patients in the up next study. And we cannot comment really just in regards to what changes would occur or if they would occur in relationship to based upon uplift at this time.

That makes sense. Thank you for taking my question.

David Mierengarten with Wedbush Securities. Your line is open.

Thanks for taking the question. I was just wondering if you'd seen any upticks in enrollment for the up next study given the situation with PARPs in this space and if there's any upside to timing for full enrollment of that study. Thanks.

So let me start with, and so first off, just in relationship to enrollment, the investigators continue to be extremely excited just in relationship to additional options within the space. And so in the platinum sensitive recurrent space, there continues to be a significant unmet need. And this is really furthered by, from the standpoint of a couple different things. One is that, you know, obviously the available therapies can only serve a proportion of those patients. But then two is that, David, I'll go into detail slightly about our patient population. So we enroll patients that have obviously already received and potentially progressed on available agents, including Bevacizumab and Parvenifers. But two is that actually we do not require patients to have received a PAR4-Bev unless they are BRCA-beaten because of, again, that differential benefit that's seen in molecular subtypes that seem to... identify those that could maximally benefit from PARP inhibitors. And then third is actually that population that only achieved stable disease as a best response to that prior chemotherapy induction. And there, there's actually nothing approved for those patients. And so to that end, we're able to potentially fulfill an unmet need within that space. And so given all of this, we do see extreme excitement in relationship to the investigators and interest in participating in the study.

Thank you.

If you'd like to ask a question, please press star one on your telephone keypad. Boris Peeker with Cowan, your line is open.

My first question is on an uplift study. You mentioned there are obviously two primary endpoints. There's an OR in NABI to be high patients, which you mentioned you completed and met the minimal target of enrollment, and then there's the OR in all comers. Can you discuss how the trial may be viewed by the FDA if there's significant difference between those two ORR numbers, either one is higher than the other or the other way around?

Yeah, thank you, Boris. I can start to respond to that. So, obviously, in order to support a positive risk versus benefit in the all comers, it will really have to be identified that there is sufficient benefit in both the high NAPB2B as well as the low NAPB2B population. But again, keeping in mind that one of the goals would be to ensure that you don't leave any patients behind. And so if there is sufficient benefit within those populations, that could then support a broad indication of the all-comers. Again, still supported by the potential for a complementary diagnostic to further identify those patients that could have potentially greater benefits.

Got it. And can you broadly state commercially how many patients would be targeted if it only supports in NAPI to be high versus all comers?

So we have two data sets we have disclosed that really talk about the prevalence of NAPI to be high. The first one is the expansion cohort where 64% of patients were determined to be NAPI to be high. The second one is a data set disclosed by our diagnostic partner, Leica, where they looked at 398 tissue samples, unique tissue samples from patients, and found the prevalence to be 59%. So the prevalence of NAPI to be high is substantial, and we believe we could benefit a substantial portion of the platinum resistance ovarian cancer population, whether we just went on the NAPI to be high or, of course, on the total population.

Great. Thank you very much for taking my question.

I will now turn the call back over to CEO Anna Potapopis for closing comments.

Thank you, operator, and thanks to all of you who tuned in for our continued support. We hope everyone enjoys the upcoming holidays, and we look forward to keeping you updated on our progress.

This concludes today's call. We thank you for your participation. You may now disconnect.