Mersana Therapeutics, Inc.

Good morning and welcome to Mursana Therapeutics' third quarter 2024 conference call. Currently, all participants are in listen-only mode. There will be a question and answer session at the end of this call. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. Please note this event is being recorded. I would now like to turn the conference over to Jason Fredette, Senior Vice President, Investor Relations, and corporate communications. Please proceed.

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 quarterly report on Form 10Q, filed with the Securities and Exchange Commission on August 13, 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 Chief Executive Officer, Dr. Marty Huber, our Chief Development Officer, Mohan Bala, and our Chief Operating Officer and Chief Financial Officer, Brian Descheitner. With that, let's turn the call over to Marty to begin our discussion.

Thank you, Jason, and good morning, everyone. I'm pleased to report that Mursana made significant progress in the third quarter as we continued to dose escalate in our Phase I clinical trials of both XMT1660 and XMT2056. We also achieved multiple milestones in our research collaborations, and we maintained the strength of our balance sheet. These accomplishments position us well as we prepare to disclose initial XMT1660 clinical data at a company event by the end of this year. XMT1660 is Mursana's ADC candidate targeting B7H4 that was developed using our Dolacynthin platform with site-specific bioconjugation and a drug-to-antibody ratio of 6. We believe it has the opportunity to differentiate within the broader ADC landscape in multiple ways. The dose escalation portion of our phase one clinical trial is ongoing, and we still have not established a maximum tolerated dose. We recently escalated to 115 milligrams per meter squared, or about 3.1 milligrams per kilogram, every four weeks. This is up from the 80 milligrams per meter squared dose we mentioned on our last conference call, and it's well beyond the highest doses we investigated with any of our prior ADCs. We believe our ability to reach this dosing level speaks both to dolusynthin's differentiated tolerability profile and to the limited expression of B7H4 in healthy tissue. In parallel with our dose escalation work, we are continuing to investigate more frequent dosing schedules for XMT1660, and we're working to refine our biomarker strategy to prepare for expansion and later stages of development. Let me turn the call over to Mohan Bala, our Chief Development Officer, to share a little more color on our enrollment in this trial and one of the indications we are focusing on.

Thanks, Marty. As a reminder, The dose escalation portion of our Phase I trial of XMT1660 is being conducted exclusively in the U.S., and it is enrolling patients with the cancers that most commonly express B7H4. These include heavily pretreated patients with recurrent triple negative and HR-positive breast cancers, endometrial cancer, and ovarian cancer. We believe XMT1660 has the potential to address important unmet needs for patients with each of these tumor types. That said, about three quarters of our enrolled patients have breast cancer. Today in the US, topoisomerase-1 ADCs are being used very frequently in breast cancer. In fact, approximately 90% of our enrolled patients with triple negative breast cancer and about half of our HR-positive patients have been treated with at least one prior topo-1 ADC, whether it be Tredelvi or NHER2. We have discussed previously the growing body of retrospective data demonstrating that patients develop resistance to topo-1 payloads. This has become a significant concern for physicians. At ESMO in September, the first prospective data exhibiting the same phenomenon were presented by a competitor that's developing a topo1 B7H4 ADC. The phase one data set included eight patients who had previously been treated with a topo1 inhibitor, and notably, none achieved an objective response to the competitor's ADC. These presentations help to reinforce the urgent need for ADCs with non-topo payloads in breast cancer, and XMT1660 fits this profile. In fact, just last week at the 15th annual World ADC in San Diego, we presented new preclinical data demonstrating XMT1660's anti-tumor activity following topo1 treatment. So what is the standard of care today for patients with late-stage breast cancer who already have received Etopo-1 ADC? Well, it's generally single-agent chemotherapy. And the prognosis for these patients is exceedingly poor, as evidenced by data for the control arm in the ASCEND trial for Tredelvi in TNBC. Importantly, ASCEND may be a potential best case, as this trial enrolled patients who were naive to the treatment with TOPO-186. Now back to Marty.

Thanks, Mohan. In multiple presentations over the course of the past year, we have shared data demonstrating the potential for dolosynthin ADCs to generate anti-tumor activity and avoid many of the toxicities that have limited other ADC platforms. We believe our initial XMT1660 data will shed light on its clinical potential across tumor types, including in patients who have previously received TOPA1 ADCs. We expect to present our initial clinical safety, tolerability, efficacy, and biomarker data from dose escalation and backfill cohorts at a company event by the end of this year. On the safety side, we would hope to show a profile that is differentiated from other ADCs. And on the efficacy side, we expect to characterize the relationships between antitumor activity and dose, as well as antitumor activity and B7H4 expression. In addition to our expected data disclosure, we also remain on track to initiate the expansion portion of our Phase I clinical trial of XMD1616 by the end of this year. In fact, we have already determined that our first area of focus for expansion will be patients with triple negative breast cancer who have previously received at least one topo1 ADC. Beyond XMT1660's potential as a monotherapy, we would hope to demonstrate a profile that may be amenable for use in combination with other agents, including combinations that we believe our competitors would not be able to pursue. As a reminder, dolosynthin ADCs are equipped with a proprietary or a statin payload that has been shown clinically to avoid dose-limiting severe neutropenia, peripheral neuropathy, and ocular toxicity. These types of adverse events are preventing many of today's ADCs from combining with certain standards of care due to the risk of overlapping toxicities. Now let's turn to XMT2056. This is our lead candidate that was developed utilizing Immunosynthin, our innate immune stimulating ADC platform that leverages our novel and proprietary sting agonist payload. XMT2056 targets a novel HER2 epitope, which we believe offer opportunity for development both as a monotherapy and in combination with other therapies, including those that target HER2. At CITSE 2024, which took place last week, we presented new preclinical data demonstrating XMT2056's ability to activate sting signaling and inhibit tumor growth at very low doses. We continue to advance the dose escalation portion of our phase one trial of this candidate. Eligible patients include those with a range of HER2 positive tumors, including breast, gastric, colorectal, and non-small cell lung cancer. And finally, Business development remains a core strategic focus for Mursana, and we're making further progress in our collaborations with both Johnson & Johnson and Merck KGA. Our efforts in this area were most recently exemplified by the milestones we achieved under these collaborations in the third quarter. For a little more color on our financials, let's turn things over to Brian.

Thank you, Marty. Let's begin with our balance sheet. We ended the third quarter with $155.2 million in cash, cash equivalents, and marketable securities. We continue to expect our capital resources will support our current operating plan commitments into 2026. Please note that our cash runway guidance does not assume any future milestone payments that we may earn from our current collaborations or proceeds that we may realize from future collaborations. Net cash used in operating activities for the third quarter of 2024 was $8.6 million, which included the benefit of an $8 million milestone payment and a $3.5 million payment for manufacturing activities from J&J. Net cash used in Q3 was significantly lower than the $46.1 million net cash used in operating activities during the year-ago quarter. The decrease primarily reflects our portfolio reprioritization efforts, including the OPEX reductions we implemented in the second half of 2023 as part of our restructuring, as well as the payments from J&J. Turning to our income statement, collaboration revenue for the third quarter of 2024 was $12.6 million, compared to $7.7 million for the same period in 2023. The year-over-year change was primarily related to the increases in revenue recognized under our J&J and Merck KGA collaboration agreements. Research and development expenses for the third quarter of 2024 declined significantly to $14.8 million, compared to $30.5 million for the same period in 2023. For the most recent quarter, approximately $2.3 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 development activities for our discontinued ADC upgrade and reduced employee compensation expense following the restructuring we substantially completed in 2023. General and administrative expenses for the third quarter of 2024 declined to $9.9 million compared to $12.9 million during the same period in 2023. Approximately $1.7 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 was primarily related to reduced consulting and professional services fees and reduced employee compensation expenses following our restructuring. And finally, Rosada's net loss for the third quarter of 2024 was $11.5 million, compared to a net loss of $41.7 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 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like 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 PD Cowan. Please go ahead.

Hi, good morning. So thanks for disclosing the nature of the patients a little bit more. It's really helpful to see. So I guess what I'm curious about is since most patients are post-POCO here that you've enrolled, do you have any updated thoughts on how we should benchmark this versus what we've seen from other B7H4 ADCs which are not, I mean, besides Astra, which, of course, was not effective there. Thanks so much.

Morning, Tara. We're not providing any specific guidance on ORR. We do recognize that there are other benchmarks out there. I mean, Pfizer has shared their data with a 20% response rate at their doses, which we're still trying to understand exactly which doses of those patients are the doses they'll take forward. We've seen the HANSO data, which, as you recall, was the China data, so we doubt there was a heavily pre-topo treatment in those patients. And in the most recent AZ data, they actually, while they did show 3 out of 12 patients with breast cancer, none of those patients had seen a prior topo. So I think those are the benchmarks that are out there, but we think there's non-trivial differences between the populations. So for us to try to get into predicting exactly which one is the right benchmark for us is a little difficult at this point in time.

Okay. I understand. Thanks so much.

The next question comes from Jonathan Chang with Lyric Partners.

Please go ahead. Hi. This is Yander Li for Jonathan Chang. Thanks for taking my question. So my first question on XMT1660. So how many patients at efficacy evaluable dose are we expecting to see for the initial data update? And what is the percentage of them would you consider as biomarker positive? Thank you.

Yeah, well, good questions there. But actually, we just haven't provided that information to date. That will be shared along with the data later on this year. So we gave the specifics today on the types of patients we've enrolled, some prior treatment, but we haven't gotten into specifics on patient numbers or B7H4 expression. As I think you know, we're enrolling all comers and looking at the B7H4 data retrospectively, and we do tend to get that information in batches. So even when we share the data, there may be some patients where we don't have complete B7H4 expression data on, but we'll share what we do have.

Got it. Thank you. And another follow-up question I have is that you've previously mentioned that you're evaluating the dose schedule that is more frequently than every four weeks. So could you provide more insight into how the more frequent dosing cohort is performing relatively to the every four-week cohort? And, yeah, are you continuing to escalating this more frequent dose as well? Thank you.

Thank you, Jonathan. We're not getting into the details of the dose and schedule. What we do, what I think we have shared is there is kind of the core schedule that we're on now of every four weeks, and that's the one we're up to 115 milligrams per meter squared that we're dosing now. What we're doing on, we're looking at more frequent doses where we split this dose at different intervals in between. Today, we're not sharing any data on the relative performance of those two. We will have, but as we noted during the script, we are going to be sharing some data on is there a dose correlation with activity et cetera, or not, but that will be part of what we describe when we show the dataset.

Understood. Thanks for taking my question.

Thank you. The next question comes from Charles Zhu with LifeSci Capital. Please go ahead.

Good morning, everyone. Thanks for providing this update and congrats on the progress. My first question, looking at some of the recent Phase I clinical readouts for B7H4 ADCs, we've seen median prior lines of therapy ranging from three for Pfizer up to five for Astra. Can you provide any additional color on what you'd expect your Phase I patients to see with respect to prior treatment history and number lines beyond, you know, the topo ADC experience? And as a similar question as well, it looks like you also have a handful of of breast cancer patients who are topo-naive, almost like an inverse to what AstraZeneca read out at the recent ESMA 2024 conference. Can you make any high-level commentary regarding what you're seeing in between the topo-experienced versus your naive patients? Thank you.

Well, I'll start with the lines of therapy. We're not providing the detailed information, but as Mohan outlined, this is a heavily pretreated population, and we will describe that. I think one of the things that will be important, and we'll give some kudos to AZ, they actually did call out specifically prior topo exposure in their data set. The others haven't even shown that. So I think it's not only number of lines, it's what are those treatments that becomes very important. For example, if a patient started out hormone receptor positive and got four lines of hormonal therapy, how relevant that is to them now that you're using a cytotoxic and a late line. So I think it is important to understand kind of the nature of the treatment as well, really specifically have these patients seen ADCs. The second part is an interesting observation. Why aren't we seeing more topo-naive? And I think one of the things we've heard from investigators, from KOLs, as we were wandering around the halls of ESMO saying, how is it that AZ had nobody with topo, prior topo in breast, and you guys seem to have a lot? And essentially what we heard is they're voting with their feet. they had already, based on the retrospective and anecdotal data and their own patient experience, decided that they don't want a topo payload after the patient has seen a topo. So one of the things we hear from our investigators and others is they are continuously looking for non-topo payloads or novel payloads that they could try in this population. So I think it's not an accident that we're ending up with this patient population. It's the investigator is telling us we need something different than a topo payload.

Got it. Great. And also, as you continue to push the dose up to and potentially beyond 115 mg per meter squared, is there a scenario where you'd continue dose escalating even as you initiate dose expansions? And Can you also talk about, you know, potential reasons why you may be able to push the dose so high, maybe specifically around things like payload retention while in circulation for free payload versus intact AADCs? Thank you.

Well, I mean, I'm going to do the second one first, then I'll come back. I mean, our core hypothesis when we designed this molecule was to avoid neuropathy, avoid neutropenia, avoid ocular tox. And as you've seen from our previous data with UPRI and 1592, we weren't limited by those toxicities. And so in some ways, the reason we're able to continue to escalate is kind of validates our hypothesis. And Tim, our chief technical officer, he was right. The molecule was designed to avoid those DLTs, and it's doing that. Now, that doesn't mean there's Not anything, and that will be part of the nature of the data is what do we have, and we'll share that with the upcoming safety thing. With regards, could we go beyond 115? That will be driven by the data at this point in time. Does that prevent us from initiating expansion? No. We have the way the protocol is designed is we can take, in fact, we're probably going to take at least two doses into expansion. That's important in the current era of Project Optimist that you kind of get substantial data, so it would be very easy for us to start with one dose and then come with a second dose later on in the same study. So the direct answer is if the data allows us to escalate, we would escalate, but that's a data-dependent decision, and yes, we can initiate expansion even if we do continue to escalate.

Great. Thank you for taking our questions, and congrats again.

Again, if you have a question, please press star then 1. The next question comes from Ashik Mubarak with Citi. Please go ahead.

Hi, guys. Thanks very much for taking my questions. I appreciate all the updates here. I just wanted to ask if you have any thoughts as to whether we should expect any differences in effect of XMT1660 depending on which topo one ADC was used in the prior line. I know triple negative breast is kind of a moving target in between Yusuf and HER2 versus Tordelvi, but is it fair to assume that the majority of patients got at least an HER2 in the prior line? And then last question from me, how are you thinking about development in gynecological tumors? Is that still part of the long-term plan, or do you plan to leave that to competitors not focused on TOPO1 and prior lines? Thanks.

I'm going to give a quick answer, and then I'm going to turn it over to Mohan to talk about the different types of TOCO ADCs patients are receiving and the gynecological development. But kind of the short answer is our hypothesis, this is not an antigen difference. So in HER2 versus Tredelvi, even though they're targeting different, ultimately they inhibit TOCO isomerase 1. And there are two known mechanisms, there's probably more, of resistance. One of those, they switch from TOCO 1 to TOCO 2. But that's for both of them, so we would not imagine a difference. The other potential mechanism of resistance is PGP pumps, where they can get efflux of the payload. As a reminder, our payload is not a substrate for PGP. So no matter which of the mechanisms of resistance, which both those molecules are kind of most commonly expected to occur, we should be able to overcome both of those. And I'm going to turn it over to Mohan to address the rest of your question on, you know, the population and the Gynon development.

Yeah, so I'll maybe kind of start with not talking specifically about our trial, but what's happening in the breast cancer kind of treatment landscape, right? So I think, you know, you can see this from the Gilead kind of earnings call as well. Tridelvi is probably the standard of care in chemo pretreated patients in triple negative. They have the bigger market share. And some of those patients are also then subsequently treated with NHER2. But as Marty said, the increasing preference is for physicians to seek alternate payloads and alternate targets. In hormone positive, it's a little bit more kind of split between, you know, and I'm talking about what the general kind of treatment pattern is. I'm sorry, kind of what was the?

Opportunity and guide.

Yeah, so really kind of I would start with endometrial, right? The endometrial kind of second slash third line space is completely open right now because the standard of care, is shifting to treatment with both a checkpoint inhibitor and chemotherapy in frontline. And if you don't get a checkpoint inhibitor frontline in, say, an MSS population, they get it second line. But I think in the future, most patients will get both in frontline. And once you get those treatments, there's really no good treatment option subsequent to that. So the opportunity in endometrial cancer is quite big. The unmet need is high, and we clearly hear this. In ovarian cancer, clearly there are a lot of treatments in development platinum-resistant. But there's actually kind of an increasing unmet need in platinum-sensitive for either therapies that can combine with platinum and then continue treatment beyond the completion of that platinum therapy. So even though there's kind of a lot of treatments competing in the platinum resistance space, there are not that many novel treatments that are being developed in the platinum sensitive space.

Got it. Thank you for all the cover.

The next question comes from Michael Schmidt with Guggenheim Securities. Please go ahead.

Hey, good morning. This is Ige on for Michael. Thanks for taking our questions and thanks for the update. Two questions from us. The first one looks like you will first focus on triple negative in the expansion cohort relative to HR positive. Wondering is it based on preclinical rationale such as B7H4 expression or was any clinical observations also part of the consideration? And I have a follow-up.

The primary reason we're going there is to be perfectly candid. It's just unmet medical need. This is where we have the most patients coming into our trial. It's an area where we believe, once again, we haven't talked to the agents or anything, that the regulatory hurdle will be quite low because essentially, as Mohan alluded to, once they've seen a topopayload ADC, there is nothing. I mean, the response rate with chemotherapy is 5%, and that's in the control arm of assent, which was not post-tridelvy. That was the same patients getting tridelvy. If you think about post-tridelvy, it's certainly no reason to expect that response rate would be higher than 5%. So I think, you know, overall, this is a place for us that we see we could go very fast. We do see hormone receptor positive as an important population, and one thing that's kind of interesting is If you look at the late-line hormone receptor-positive breast cancer patients, especially when they get kind of the HER2 ultra-lows, they're starting to look a lot more like TNBC. You know, once they've seen that in HER2, there's nothing left for them. So we think those are both opportunities, but TNBC is the cleanest, easiest, fastest.

Got it. That's very helpful. And then second question, there was a poster at last year's ASCO discussing optimal sequencing of SN38 and DXT-ADC in breast cancer patients. I'm just wondering, is there any preclinical rationale or even clinical observation suggesting, you know, optimal sequencing of DALA-SENFEN and TOP1-ADC?

I think there's, well, we're not really focused on the, is there an optimal? We're kind of, what we've been focused on is the reality of the clinical situation is we're going to be post-topo for the initial indications. So what the focus on data we showed this year at World ADC was showing that we have meaningful activity superior to a topo payload in a cell, in preclinical models that had previously been exposed to topo. So we're not I think that's an interesting long-term question. Should we be in front of the topo? But to be perfectly frank, right now, today, given that the topos are so well-established in the marketplace, our point of entry is going to be post-topo. Or the really cool thing we can think about is assuming we demonstrate the safety profile that we've shown today with the dual system, do you just go with a topo and not even bother about the sequencing, do them together? two different targets with two different payloads could be a pretty cool thing that others can't do because of either neuropathy, neutropenia, echo attacks, or myeloma suppression.

That is very helpful. Thank you. Again, if you have a question, please press star then 1. The next question comes from Justin Zeeland with BTIG. Please go ahead.

Thanks for taking our question. I wanted to hear your thoughts on what a meaningful delta would be on safety events to differentiate 1660 from the class based on your mechanism of action. And how do you think the differentiated safety profile may enable potential for combination therapy in the future?

I'm going to start it out, and then I'm going to let Mohan kind of talk a little bit about some of the data we generated already in combination with CARBO with our previous molecules. One of the things that was a key focus for us is CARBO has challenges for myelopathy. Basically, there's myelosuppression, but more importantly, when you think about ovarian cancer patients as the best example of this, they've gotten taxanes, they've gotten platinum, they all have neuropathy. And clearly, when you were trying to go into platinum-resistant ovarian cancer, if you had a drug that caused more neuropathy, that was very much a limitation. If you think about the neutropenia also associated with any type of chemotherapy, so we were very focused on the neuropathy and neutropenia, and we were very pleased if you look at the 600 patients with Uprim, which is the same payload, different scapulinker, or with dolicentin, our first molecule, 1592, which was an happy 2B, we really didn't see meaningful neuropathy or neutropenia. So we think the bar is you really, based on that experience, with the payload, we think those should be quite low. The other challenge that you see with the topopayloads is the myelosuppression, and where you see just kind of pancytopenia type effects. We really, if you go back to Upri and Dolazepam, that really wasn't a challenge for us with those molecules. And we think, you know, if you think about it, you can't be giving cytotoxic chemotherapy if your ADC is causing severe myelosuppression. People have tried to do these DAD studies where they combine them, and you end up significantly compromising the dose of both ADCs. So for us, kind of the holy grail is can you give a full dose or near full dose of the ADC in combination with either another ADC or with another cytotoxic chemotherapy? While we haven't done it with this molecule, I'm going to turn it over to Mohan to talk a little bit. We did present some data recently at IGSC where we did combine with CARBO. Mohan?

Yeah, so with UPRI, which was our previous ADC targeting NAPI 2B on the DoraFlexin platform, but using the same payload, we did a study called UPRI, where we combined UPRI with carboplatin for six cycles and then continued treatment with UPRI. We presented data from the study at IGCS recently, and the study really established the ability to combine an ADC with this particular payload that we are using also for 1660 with carboplatin. So we did not see any exacerbation of neutropenia or neuropathy. There was no increased alopecia. So generally, a well-tolerated profile, which was able to be dosed for that full six cycle and then actually beyond the completion of the platinum regimen. In addition to kind of the safety, we also saw meaningful activity with a 70-plus percent response rate. So that study really we see as a proof of concept for the potential ability to combine ADCs with this particular payload with chemotherapy.

All makes sense to me. Thanks for taking my question.

This concludes our question and answer session. This concludes our question and answer session. I would like to turn the conference back over to CEO Martin Huber for any closing remarks.

Thank you, operator, and thanks, everyone, for dialing in. We'll look forward to speaking with you by the end of the year to review our initial clinical data for XMT1660. That concludes our call, operator.

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