Mersana Therapeutics, Inc.

Good morning and welcome to Mursana Therapeutics' first quarter 2024 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. 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 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 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, 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 Descheitner. 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, Mursana is an ADC innovator that's advancing product candidates based on its two proprietary platforms. The first of these is dolosynthin, our next generation cytotoxic ADC platform, and the second is immunosynthin, a novel platform that utilizes a sting agonist payload. Let's begin today's call with a brief discussion of new insights about dolosynthin 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 DolaSynthin'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 XMT1660, our lead dolosynthin ADC that targets B7H4. We're in the midst of a phase one clinical trial that's enrolling patients with solid tumors, including triple negative and ER positive breast cancer, ovarian cancer, and endometrial cancers. B7H4 is a member of the B7 family of immune checkpoint markers. The scientific literature suggests that B7H4 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 B7H4's selective expression and dolesynthin'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 dolosynthin 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 B7H4 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 XMT1660 as a potential best-in-class asset, and we are taking the time needed to accomplish our objective. Now let's shift to XMT2056, which is the lead candidate we are developed utilizing immunosynthin. Our immunosynthin 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. XMT2056 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 dolosynthin ADC discovery efforts, and with Merck KGA for immunosynthin discovery efforts. With that, let's turn the call over to our Chief Operating and Financial Officer, Brian Descheitner, 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 most recent quarter, approximately $2.5 million of this spending was related to non-cash 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 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 expenses following our restructuring. Please note that this restructuring is now substantially complete with no meaningful costs incurred in Q1. And finally, Mursana'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?

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

Hi, good morning. Thanks for taking the questions. 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 mid-year to the second half? Thank you.

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 B7H4 ADCs in clinical development. That said, we do anticipate that these data would provide preliminary but meaningful efficacy data as well as safety tolerability 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.

Okay, great. Thank you.

Again, if you have a question, please press star, then 1. The next question comes from Kaveri Pullman of BTIG. Please go ahead.

Great. Good morning. Thanks for taking my questions. Can you guys just provide any additional color on what your decision to move the timeline data release to second half? And I would also appreciate if you can tell us about how you're making decision on backfilling cohorts. Is it based on the PKPD profile alone? Are you planning to do high doses, to go there to define MTD dose, or you'll be selecting optimal dose based on the safety and PKPD data alone? Also, will you be defining your optimal dose during the update?

Thank you. 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 timelines, I think we, you know, 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, which I think is 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 and 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 PKPD, I would say, but it's more about making sure we have reasonably sized data sets for some of the tumors of interest. 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 three plus three, you like to have more patients than that at any given dose level to really get comfortable with a recommended phase two 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.

That's helpful. Thank you.

The next question comes from Jonathan Chang of Lear Inc. Partners. Please go ahead.

Hey, guys. This is Dylan Drake, Dr. Jonathan. Thanks for taking our questions today. So you previously outlined some tumor types that competitors have seen efficacy in for B7H4. Do you still view those as potential expansion indications, or do you have any further thoughts surrounding where you plan to initiate expansion cohorts? And then, second, 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 60 and 60 may enable 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. The four tumor types of most interest to us, because they have the highest level of H4 expression remain, triple negative breast cancer, hormone receptor positive breast cancer, endometrial and ovarian cancer. Those are the tumor types we're still focusing on in escalation and in our back fills. 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 the second half, We are not going into the details of which tumor types exactly when. 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 doula-symptom 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 NAPI 2Bs, 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 Tredelby are something that we could consider that would not be possible with a myelosuppressive ADC. So those are just a couple thoughts on combinations. Great. I appreciate that. Thanks so much.

Again, to ask a question, please press star then one. Our next question comes from Brian Chang of JPMorgan. Please go ahead.

Hey guys, thanks for taking our questions this morning. Can you elaborate on your prepared comments related to optimizing efforts behind schedule and biomarker for 1660? How far are you today from identifying the optimal schedule and Are there any specifics on the gating factor they can provide before moving to those extensions? Thanks for the questions.

What I think is important is we are still in dose escalation and not established in MTV. 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 and 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 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 two 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 a 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. Please go ahead.

Hey, guys. Thanks for taking my questions. Yeah, just a follow-up on 1660. You know, I guess is their PK different from what you had expected, and are you surprised that you're not yet seeing MTDs? I think last time You said you were in those level seven. You're obviously far into the active dosing range at this point. But, yeah, I'm just curious if there's anything, you know, unique going on or if this is just part of the regular, you know, Project Optimus, you know, 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 – with 1592, our NAPI-2B dolosynthin, we had hit dose-limiting ILD at 56 milligrams per meter squared. As we stated last time, we're over that now. So we're at dose ranges that we haven't been before, and 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 Optimist, 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 had 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 two dose that we take into expansion. So I think it is just a little bit, and this has been a For lack of a better word, a personal growth for myself is appreciating the more time and energy on dose optimization than historically we did.

Yeah, no, I think that makes sense. And I think other companies have also looked at multiple different schedules before selecting an RPCD. Can you comment? So is it every two weeks, I think, in the phase one? And what are you looking at as alternatives? Yes.

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

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

Yeah, maybe I can take that. That's a great question. We're currently working on our biomarker strategy. 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 B7H4 expression and the probability of response. So, in other words, we're retrospectively running an IHC test to establish B7H4 expression levels. But we think this will be an important part of the development program to really nail down.

Awesome. Great. Thanks for taking my questions.

Our next question comes from Ashtika Goonwarding of Truist. Please go ahead.

Hi, good morning, guys, and thanks for taking my questions. So previously what Michael just asked about as well, about dose level 7 or 59 megs per meter squared, you guys were around there 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 one 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 emphasized that. But I do think when you start looking at dose and 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 dose and schedule. but we're not getting into the details of exactly what those are. And part of that is, this is something that is fairly competitive space, and understanding ADC dose and 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 two-on-one-off. Is that how we should be thinking about it without getting too specific?

Yeah, we're really not getting into more specifics. I'm sorry. So, yeah, we're just not going there at this stage.

Okay, great. Thanks, guys. Appreciate the update.

Once more, if you have a question, please press star, then 1. Our next question comes from Ashik Mubarak of Citi. Please go ahead.

Hi, guys. Thanks for taking my questions. I think you already addressed my first one, which is just to confirm that the biomarker you're looking at is a B7H4. biomarker based on IC. I'm assuming that's correct versus maybe something else. Assuming that's correct, 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 assay might be? Thanks.

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 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?

Yeah, 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.

Okay. Thanks very much. If you're asked a question, please press star, then one. Our next question comes from Colleen Cusey of Baird. Please go ahead.

Thanks. Good morning, and thanks for taking our questions. 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?

Yeah, so, Colleen, we're not going to give more specifics than what we've already shared on responses. And in terms of the biomarker, you know, 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. Thank you. And then for the expansion cohorts, would you plan to bring 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 a project-optimist 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.

Great. Thanks for taking our questions.

The next question comes from Ashtika Boonwardeen of Truist. Please go ahead.

Hey guys, thanks for taking my follow up. 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. Thank you.

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 dose and schedule. Ultimately, that's really what's most important.

Thanks. That's really clear. Appreciate it.

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're at the Cowan 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 is now concluded. Thank you for attending today's presentation. You may now disconnect.