Mersana Therapeutics, Inc.

Good morning and welcome to the Mursana Therapeutics' fourth quarter 2023 conference call and webcast. Currently, all participants are in listen-only mode. There will be a question and answer session at the end of this call. Please note, this call is being recorded. I would now like to turn the call over to Jason Fredette, Senior Vice President, Investor Relations and Corporate Communications.

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 relating to our platforms, product candidates, business strategy, clinical trial execution and results, business development efforts, and cash runway. Each of these forward-looking statements is 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 quarterly report on Form 10Q, filed with the Securities and Exchange Commission on November 7, 2023, and in subsequent SEC filings. Our filings are available at sec.gov and on our website, mursana.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 Mursana's President and Chief Executive Officer, Dr. Marty Huber, and our Chief Operating Officer and Chief Financial Officer, Brian Descheidner. With that, let me turn the call over to Marty to begin our discussion.

Thank you, Jason, and good morning, everyone. It's great to be speaking with you again. Let's start today's call off with a brief description of our high-level aim here at Mursana. Although ADCs have firmly established a position at the forefront of oncology, there are significant platform and payload limitations that we believe are preventing this therapeutic class from realizing its full potential. At Mursana, we're focused on bringing forward innovations to address these limitations to meaningfully improve the efficacy and safety of ADCs. Our goals are first to minimize dose limiting platform toxicities. We believe the achievement of this goal could allow us to maximize the monotherapy potential of cytotoxic ADCs and also allow them to be used effectively in combination with other standard of care treatments. Something that simply isn't possible with many of today's ADCs. Second, we aim to avoid resistance mechanisms that appear to be hampering certain ADCs. And third, we're striving to extend the field well beyond cytotoxics and establish an entirely new class of ADC therapies that elicit a targeted innate immune response to combat cancer. With that as a backdrop, let's turn our attention to the progress we're making in accomplishing these objectives. And let's begin with our proprietary or statin payload that's being used in our next generation cytotoxic ADC platform, Dolacynthin. When we developed this payload, one of our core objectives was to avoid the dose-limiting neutropenia and peripheral neuropathy that is reported with ADCs based on the VC-MMAE platform and other first-generation ADC platforms. Our payload has controlled bystander effect, meaning that it initially is membrane permeable and capable of bystander killing. However, it has also been designed to be enzymatically converted to an active metabolite that is much less membrane permeable, resulting in its accumulation in the tumor and avoidance of off-target toxicity. While we view our payload as a core differentiator and advantage, the same can be said for the platform we're using to deliver that payload, dolusynthin. We have presented extensive preclinical data in the past, demonstrating important advantages for dolosynthin ADCs against ADCs produced using our own first-generation platform, doloflexin, and other platforms like BCMMAE. 2024 provides us with the opportunity to begin presenting the clinical data. Next week in Barcelona at the European Society of Gynecological Oncology, otherwise known as ESGO, clinical data will be presented for two discontinued product candidates, UPRI and XMT1592. Both of these candidates utilize the same NAPI2B antibody and the same proprietary payload with controlled bisphander effect. However, UPRI was developed using dolaflexin and 1592 was developed with dolasynthin. We believe these clinical data help to affirm that the severe neutropenia, peripheral neuropathy, and ocular toxicity that is frequently observed in trials of ADCs based on other platforms and payloads are uncommon with our payload. We also believe they clearly show that dolosynthin further reduces platform toxicities compared with doloflexin. Following these presentations in mid-2024, we plan to share our initial clinical data for XMT1660, our B7H4 targeting dolicentin ABC. We continue to be pleased with the progress we're making in our Phase I trial of validating the safety and tolerability of XMT1660 as a single agent in patients with solid tumors, including triple negative and estrogen receptor positive breast cancer, as well as ovarian and endometrial cancers. The dose escalation portion of the trial is ongoing. In fact, we just recently escalated to a dose of 59 milligrams per meter squared, which is the highest dose that we have investigated clinically with Adolescent and ADC. A maximum tolerated dose for XMT1660 still has not been established. In addition, the continuing escalating dose, we are also continuing to enroll patients in backfill cohorts to optimize dose and schedule. As is typical for phase one, we're enrolling a heavily pretreated patient population. Today, single agent chemotherapy is the standard of care for these types of patients, and their prognosis is exceedingly poor. For instance, the objective response rate in late stage triple negative breast cancer is estimated to be approximately 5% or less, with a duration of response that is less than four months. Today, most breast cancer patients here in the US are receiving Inher2 and Tredelvi early in their treatment. An increasing amount of data is emerging that shows patients are developing resistance following their first topo1 ADC treatment. These factors are presenting an urgent unmet need for new ADCs with alternative payloads that do not share these resistance mechanisms. We are enrolling many patients who have previously received at least one of these topo-ADCs in our phase one clinical trial. And we're looking forward to sharing initial data mid-year so we can begin to clinically characterize XMT1660's efficacy and safety profile. Now, while we're very excited about XMT1660 and dolosynthin, we believe IO may be the next significant frontier for ADCs. Our immunosynthin platform is designed to harness the power of sting and overcome the historic limitations of free systemic sting agonist and intratumoral injections. This platform has the potential to deliver a targeted and impactful one-two punch by activating sting in a target-dependent manner in tumor cells and in tumor-resident myeloid and dendritic cells, while also minimizing the risk of systemic exposure. XMT2056 is our lead immunosynthin ADC. We're currently in the process of restarting our phase one trial of this HER2-targeting ADC, following a lift of the clinical hold on this trial by the FDA in the fourth quarter of 2023. In phase one, we plan to enroll patients with a range of different HER2-positive tumors, including breast, gastric, colorectal, and non-small cell lung cancer, and we're looking forward to advancing dose escalation in 2024. In addition to our independent programs over the past two years, we also have entered into collaboration agreements with Johnson & Johnson, Merck KGA, and GSK. We remain very much engaged with these companies as we seek to maximize the potential of our ADC platforms and product candidates. So, in summary, Mursana entered 2024 with energy and excitement. We have two differentiated ADC platforms, platforms that we think could address significant limitations for today's ADCs. We also have two differentiated clinical stage assets, an upcoming data readout on XMT1660, and a strong balance sheet. On this latter point, let me turn the call over to our Chief Operating and Financial Officer, Brian Descheitner, to share more detail.

Thank you, Marty. Let's begin with the financial highlights for the fourth quarter of 2023. We ended the year with approximately $209 million in cash, cash equivalents, and marketable securities. Net cash used in operating activities was approximately $32 million for the fourth quarter of 2023. which is down significantly from prior quarters, thanks to our restructuring and up rewind down efforts. From a cash expenditure standpoint, we can expect to continue realizing benefits from these efforts in 2024. As a result, our capital resources are expected to be sufficient to support our current 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 fourth quarter of 2023 was $10.7 million compared to $14.7 million for the same period in 2022. The year-over-year change was primarily related to the timing of research activities for the Johnson & Johnson collaboration and achievement of a Johnson & Johnson early development milestone in the fourth quarter of 2022. Research and development expenses for the fourth quarter of 2023 were $21.5 million compared to $45.7 million for the same period in 2022. Approximately $2.2 million in non-cash stock-based compensation expenses and $3.7 million of external costs related to our up-rewind-down efforts were included in the R&D line in the most recent quarter. The year-over-year decline in R&D was primarily related to reduced manufacturing and clinical costs related to UPRI and XMT 2056 and reduced employee compensation costs, partially offset by increased clinical costs related to XMT 1660. General and administrative expenses for the fourth quarter of 2023 were $10.1 million compared to $14.8 million during the same period in 2022. Approximately $1.9 million in non-cash 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 as a result of the restructuring plan we announced in July 2023. Mursana's net loss for the fourth quarter of 2023 was $19.5 million, compared to a net loss of $44.9 million for the same period in 2022. That concludes our business update. Operator, would you please open the call to questions from the audience?

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Tara Bancroft with TD Carbon. Please go ahead.

Hi. Good morning. So maybe you could go into specific expectations for the mid-year 1660 update. And specifically, given the 1592 data that are coming next month, what takeaways can we use from that to take forward and increase our confidence in the 1660 data based on the new platform technology? Thanks.

Thanks, Tara. So this is Jason. I'll start that. The mid-year data will be efficacy and safety colorability data. We haven't specified exactly what we'll show just yet, but mid-year is the guidance, as you noted. Maybe I'll turn it over to Marty for the second part of the question.

Just so I make sure I'm answering your questions, I understand is what can we learn from the ESGO data set on 1592? I think as we had noted was it's the same NAPI2B antibody, the same payload. The only difference is the scaffold, the dolaflexin versus the dolasynthin. And what we will show is the safety data from 1592 demonstrates what we would expect to see with our platform-related effects. And what we observed or will show in the data is that one, we continue to show an absence of peripheral neuropathy, absence of neutropenia, absence of ocular toxicity. But in addition, we plan to show that the data with 1592, that dolosynthin also has lower risk of some of the other platform toxicities that were observed with UPRI. And those details will be apparent between the two presentations.

Okay, thank you.

Thank you. The next question comes from Jonathan Chang with Learing Partners. Please go ahead.

Hi, guys. Good morning. Thanks for taking my questions. First question, can you just remind us the decision-making process behind what happened with the second-gen NAPI 2B program? And then just following up on the previous question, what the lessons there could be for the ongoing B7H4 program. And the second question, can you provide any color on how enrollment has progressed on the B7H4 study and where you are in dose optimization? Thank you.

Thank you, Jonathan. That sounds like three questions, but we'll take them in turn. So with respect to 1592, you know, the original premise for that program was in lung cancer. And over the course of our explorations in lung cancer, we came to realize that the prevalence of the biomarker is much lower in lung cancer than was reported by the literature and was reported in ovarian cancer as well. And so that very much, given our cost of capital and the other opportunities available to us in our portfolio, drove the decisions around strategic reprioritization for 1592. I think I'll pass it to Marty with respect to the 60-60 question.

Yeah. And with regards to learnings for B7H4, one of the important observations from both 1536 and 1592 is that there was there was pneumonitis that we believe is associated with the presence of map b2b on type 2 pneumocytes that are in the lung one of the things we've learned as we look at b7h4 there is not that same level of expression or any expression on the pneumocytes for b7h4 and one of the reasons we were pleased to see the data from ESMO, from CGEN, and from HANSO at ESMO, the last data set, they showed no evidence of target-mediated toxicity. So I think an important learning for us is that for the pneumonitis that we observed with NAPI2V is most likely on target, and we look forward to our data set in 1660. With regard to your enrollment question, I think we We've essentially now escalated beyond dose level six. We are now at 59 milligrams per meter squared. We are continuing to enroll in the backfills. As we've noted, it's up to 12 patients are in these backfills at dose levels. I think the other thing we've highlighted that we are looking at potential Q3 as well as alternative Q4 schedules. And so we believe we're continuing to optimize dose and schedule for 16-16.

Got it. Thank you.

Thank you. The next question comes from Ashik Mubarak with Citi. Please go ahead.

Hi, guys. Thanks for taking my questions, and congrats on the progress. I guess a couple for me. You said you're starting expansion cohorts for XMTA 1660 in the second quarter. I guess when those cohorts get up and running, will you share which specific tumor types are being moved into the expansion phase? And also at that point, will you share what the go-forward dose will be, or will we need to wait for those details at the mid-year data update? Thanks.

Yeah, good questions. We haven't predefined that, I would say. So, you know, stay tuned on that front. We're operating in a competitive environment in the B7H4 space, so TBD on that.

Okay, understood. And then maybe one more on 2056. It sounds like you're getting that study up and running again, but I'm just wondering what the gating factor is to getting dosing going or am I misunderstanding? And that's already happened.

We're taking the steps required to get the trial back underway as soon as possible. This includes reengaging with our trial sites, so it's the internal process around IRB, but also when we change the dose and make some other adjustments, that was a protocol amendment, and then that has knock-on effects on databases and CROs, et cetera. So it's kind of the normal logistical stuff associated with a study restart. Those are underway.

Got it. That's very helpful. Thanks very much.

Thank you. Again, if you have questions, please press star, then 1. The next question comes from Colleen Kruze with Baird. Please go ahead.

Hi. Good morning. Thanks for taking our questions. Can you remind us how you're dealing with the B7H4 biomarker in this Phase I-II dose escalation? Are you measuring at a baseline but not pre-selecting patients? And then would we expect any of the biomarker data in the midyear update?

This is Marty. At this point in time, we are gathering data pretreatment on B7H4 expression. However, we are not using that to select for patients. Patients are enrolled regardless of the outcome of the test. With regards to data display, as Jason noted, we are in a highly competitive environment. of note, neither Pfizer nor Hanso shared their biomarker data, and so we will have to make a judgment call at the mid-year data presentation, will we or will we not share that data.

Great. That's helpful. Thank you. And then on 2056, how involved is GSK at this point in kind of restarting the study?

Well, maybe I'll take that. So the product has an option with GSK, as you will recall, and they have not exercised that option. And so we retain decision-making control over what we do in that product. But that said, GSK has been very engaged in the process, and we're very pleased with the partnership.

Great. Thanks for taking our questions.

Thank you. The next question comes from Kovari Paulman with VTIG. Please go ahead.

Hi, this is Christian. I'm on for Caveri today. So actually, the previous question answered parts of what I was wondering, but for the phase one trial for 1660, how much overlap do you expect to see between B7H4 and some of the other ADC targets, such as TROP2 folate receptor alpha and CDH6? And my second question, for the STING ADC, could you tell us how you're thinking about 2056 potentially fitting into the current treatment landscape, is it mostly going to be a combination drug?

Hi, it's Marty. With regards to 1660, while we don't have detailed data on that yet, one thing we do know is there's a trend for B7H4 and PD-L1 on the tumor to not be overlapping. The Venn diagram of those two populations tends to be fairly separate. With regards to folate receptor alpha, do not have any specific data available at this point in time. And I wouldn't want to speculate on that, but there is no, we're not aware of any overlap in biology between the two targets, but as far as specific data that says whether the populations overlap or not, I can't give you that answer today.

Okay, got it, thank you.

And with regards to the sting, We are certainly thinking in terms of combinations for 2056. We think one of the advantages of having a locally tumor-directed sting agonist is that that would allow you to do combinations with other systemic treatments. For example, you could give potentially an anti-PD-1 in a setting where you normally would not be able to because systemic sting activation combined with the PD-1 would just be really too toxic for patients. So that is one of our long-term strategies is surely want to show activity monotherapy, but ultimately we think it will be a combination agent. And one last point on that, the actual epitope for HER2 is different than the HER2. So you could, in theory, actually do a HER2 combo.

Okay, got it. Thank you. And if I can just throw one last one in there. Sorry if I missed this, but how many patients will be in the upcoming data for 1592 next week?

For 1592? I think now the ESGO abstract is available. And so in that data set, there were 31 patients.

Okay, thank you.

Thank you. Ladies and gentlemen, if you have a question, please press star, then 1. We have the next question from Michael Schmidt with Guggenheim. Please go ahead.

Hey, guys. Good morning. Thanks for taking my questions. Just a couple more on 1660. In the phase one study, could you comment on how the tumor histologies in the study, you know, compare perhaps to what CJEN and Pfizer have shown in their phase one? And I think they had a pretty decent signal in breast cancer. Is that, you know, is there overlapping of patient types in your study and theirs? And then just, you know, as we think high level, you know, you mentioned your planning to initiate the expansion cohort soon. Any views on just general positioning along the term relative to the CGEN ADC in terms of differentiation perhaps? Is it mainly lower tox on your end or increased efficacy of both perhaps? And then how do you think about differential development opportunities versus what they've been doing? Thanks so much.

Good morning, Michael. I'm going to take the first part of your question, then I'm going to turn it over to Brian to kind of talk to you about how we're thinking about the molecule longer term. With regards to the current data, we are enrolling patients with triple negative breast cancer, hormone receptor positive breast cancer, endometrial cancer, and ovarian cancer. So as part of the dose escalation, any one of those four histologies is eligible for the study. Once we get into backfill, we can be a little more specific. And while we have not given detailed information on who we are enrolling, I think a couple points can be made. Clearly, triple negative breast cancer is an area of high medical need in which after patients progress on Tridelvi and or in HER2, there's essentially nothing for those patients. So you will, I mean, while we're not giving the details of how many of each, that is a patient population that we will have in our data set.

And if I can just expand on your question about differentiation and positioning. As Martin remarked earlier, one of the things that we were looking for in the ESMO data with any indication of a B7H4 on target types is you wouldn't see that, which is a nice validation of both the safety and the efficacy from those abstracts. You know, as a reminder, we've compared dolacinthin ACC's versus BCMMAE ADC's extensively preclinically. And we show that our platform preclinically can deliver payload to the tumor much more efficiently and effectively. In addition, we've shown in our past clinical presentations for other product candidates that our payload appears to avoid the severe utopenia or neuropathy that tend to be dose limiting with MMAE. And so when you think about what that means, it's about expanding what an ADC can do in the clinic, and whether that's combinations or earlier lines, to create very strong regimens. I think if you contrast with the HANSO GSK and sort of the topos in general, keep in mind that our payload is very much orthogonal to that class, and many patients in this setting are receiving prior topo ADCs. So we believe this could be a consideration in the future landscape, and you see echoes of that in sort of commentary around the HANSO data. And, you know, the HANSO program also seems to have relatively profound myelose suppression that raises similar considerations about combinations and moves into earlier lines. we think that the landscape that's been established by that ESMO data disclosure leaves opportunity.

Great. Thanks so much.

Thank you. The next question comes from Asthika Gunavardhana with Truist. Please go ahead.

Hey, good morning, guys, and thanks for taking my questions. You guys just very nicely laid out how some of the design features for 1660 could be making a difference. And we look at things like duration of response and duration of therapy as good measures to confirm if that actually has a clinical difference. So maybe I'll ask you guys this. Given what we know about some of the other B7H4 ADCs, what kind of duration of response and duration of therapy would you be looking for in 1660 to say, aha, this actually makes a difference in the clinics? with the patients treated with 1660.

Hi, it's Marty. One, I would like to put a little caveat of looking at duration of response in phase one data sets even with pretty robust data sets is always challenging just because the number of responders to get a precise point estimate is always relatively limited. So we want to be a little careful about getting too obsessed on that early on in the development program. However, we do agree it's a very important question. And if you think about it, the standard of care, chemotherapy, has a 5% objective response rate. And by the way, that's not even in a, that's the control arm from the current ADCs. That's not post-Tredelvia or post-NR2. And importantly, the duration of response for that control arm was less than four months. So I think, you know, a DOR response You know, usually when we think about these things, you'll like to see a six, you know, five, six. One of the things that we were very excited about from UPRI is while overall the response rate was lower, one of the things you'll see in the data is that the duration of response for those patients who did respond to UPRI was over seven months. So we think there's an opportunity to increase DOR. I think it's just going to be challenging to clearly demonstrate that in the initial data set.

Got it. That's very helpful. I'm also wondering, you talked about how resistance emerging from prior payload exposure is an issue that's emerging a lot more in the birth cancer patient population. Will the phase one data set, the dose test question data set, give us any sort of clues or be able to parse out when patients who are developing resistance to prior payloads and show us what the efficacy of 1660 looks like in there? Or is that just too much to try and tease out of that data set that's coming up? Yeah. So this is Jason again.

So again, I think it would be a little premature for us to pigeonhole ourselves into specific cuts of the data at this stage. We didn't note neither HANSO nor CGEN showed any responses, transparently at least, in post-topo treated patients. But again, we're not going to commit to that today.

Got it.

Thanks for taking my questions, guys.

Thank you. We have the next question from the line of Brian Cheng with JP Morgan. Please go ahead.

Great. Thanks for taking our questions this morning. Maybe the first one is from a modeling perspective. How should we think about the expense trajectory given your plan to move forward into potentially larger studies across a number of indications? And I have a quick follow-up. Thank you.

Sure. Well, you know, our cash runway guidance is based on our current operating plan commitments. That does include the early clinical development of both 1660 and 2056. But, you know, if I sort of double-click on your question, as you know, we don't provide forward-looking financial guidance. But you'll note in our press release and our remarks in the K that we reported a significant reduction in OpEx in Q4. and have since then substantially completed our up-rewind down. So we think this meaningfully simplified cost structure is going to enable our available funds to support our operating plan commitments into 2026. Great.

And then second is on the dose escalation work that you're doing. for 1660, how does the latest escalation to 59 mcg per meter square compare to your peers who are also targeting B7H4? You know, maybe you can also provide some color on the expected therapeutic window that you expect to see compared to your peers. Thank you.

We want to be careful on directly comparison across the ADCs for There's several differences in these molecules. I mean, not only do they have different amounts of payload, we have a DAR6, but in addition, the potency of the payloads is different. And then one fundamental difference is because of our scaffold, our dual-sensitive platform, with the improved drug-like properties and antibody-like half-lives, we end up allowing a less frequent dose dosing either q3 or q4 but what that's associated with if you think about it is it's a slower clearance of the molecule because it has an antibody-like half-life so it gets very complicated to try to do a direct detailed comparison until we get the full data disclosure and then we can start having that conversation great thank you marty thanks for

Thank you. 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 hope to see some of you in the next couple weeks at ESGO as well as Cowan and at Lyric. So that concludes the call, Operator. Thank you.

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