Mersana Therapeutics, Inc.

Good morning, and welcome to Mursana Therapeutics' fourth quarter and year-end 2024 conference call. 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 conference over to Jason Fredet, 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 the potential clinical benefits of our product candidates and platforms, our clinical trial progress and designs, dosing and patient management strategies, addressable market opportunities, anticipated milestones and data disclosures, 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 10-Q, filed with the Securities and Exchange Commission on November 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, and our Chief Operating Officer and Chief Financial Officer, Brian Descheitner. With that, let me turn the call over to Marty to begin the discussion.

Thank you, Jason, and good morning, everyone. Over the past several months, we have accomplished a great deal here at Mursana. Most notably, with our lead dolosynthin ADC, Emily, we reported positive initial clinical data, started the expansion portion of our Phase I trial, and were granted an additional fast-track designation for a growing portion of the breast cancer population that has previously been treated with a topoisomerase I inhibitor, or topo-1 ADC. At the same time, we advanced Phase I dose escalation with XMT2056, our lead immunosynthin ADC, while also supporting our collaborators. Let's focus first on Emily, Marsana's ADC targeting B7H4. In January, we reported initial clinical data from 130 patients who were enrolled in dose escalation and backfill cohorts as of December 13, 2024 data cutoff. From a safety and tolerability standpoint, EMILY was observed to be highly differentiated within the ADC space. The most common treatment-related adverse events of any grade were transient increases in AST, generally asymptomatic and reversible proteinuria, generally low-grade nausea, and low-grade fatigue. Importantly, unlike many other ADCs, we did not see dose-limiting neutropenia, neuropathy, ocular toxicity, interstitial lung disease, or thrombocytopenia. This provides us with the confidence that Emily could have an attractive monotherapy profile. Just as importantly, we believe it also could enable combinations with standards of care like platinum chemotherapy and other ADCs that our competitors would be challenged to pursue. From a clinical activity standpoint, confirmed objective responses were observed in all enrolled tumor types. These included patients with triple negative and hormone receptor positive breast cancer, endometrial cancer, ovarian cancer, and adenoid cystic carcinoma type 1, otherwise known as ACC1. At intermediate doses, which ranged from about 38 to 67 milligrams per meter squared, or about 1 to 2 milligrams per kilogram, The confirmed objective response rate was 23% across all tumor types with high B7H4 expression, which we defined as an IHC score of 70% or more. Focusing specifically on the evaluable patients in this dose range with B7H4 high triple negative breast cancer, the confirmed ORR was also 23%. At the end of 2024, we initiated the expansion portion of our trial in patients with TNBC who have previously been treated with at least one topo 180C, a population with a very high unmet need. We believe we are positioned for success for a few key reasons. The first is the dose we're utilizing. The second is our inclusion criteria. Third is the standard of care for these patients today. And the final factor is the competitive environment in which we are operating. Let's begin with the dose. Generally speaking, as you might expect, we have seen that clinical activity tends to increase along with Emily's dose. As I mentioned, the 23% ORR we observed was generated across a range of doses from about 38 to 67 milligrams per meter squared. we have brought the top dose from this range, specifically 67.4 milligrams per meter squared every four weeks, into expansion. As we previously reported, this particular dose was well tolerated. Additionally, each of the four B7H4 high patients who received this dose achieved target lesion reductions, and each also remained on treatment for durations of approximately 16 weeks or more as of the data cutoff. A second factor that can influence response is prior treatment. This is well established in oncology, and specifically in triple negative breast cancer. As a reminder, the 23% ORR that we observed with Emily in TNBC was generated in a population of 13 evaluable patients. 12 of these patients received more than three lines of prior therapy, and all had received at least one TOCO-180C. These data compare favorably to historical benchmarks. For instance, a 23% ORR was also seen with Tredelby and TMBC patients who received more than three prior lines of therapy in the phase three assent study. But of course, this was in a topo-naive setting. Tredelby's ORR increased to nearly 40% in patients who received only two or three prior lines of therapy. In expansion, we are limiting enrollment to patients with a maximum of four prior lines, while also mandating that at least one prior treatment must have been a TOPA-180C. It is also important to keep in mind what the standard of care is in TMBC today. In ascent, the control arm, which was single agent chemo, had an ORR of only about 5%. And finally, there is the competitive environment. we view recent developments within the B7H4 ADC landscape as favorable for Emily. Most notably, the company that we have viewed as our primary would-be competitor within the breast cancer space, Pfizer, recently announced that it had discontinued development of its B7H4 ADC candidate. The other B7H4 ADCs that are at a similar stage of clinical development as us all have topo1 payloads. As a result, unlike Emily, we believe they are subject to topo1 resistance mechanisms. In fact, some of these companies appear to be excluding patients who have received prior topo1 therapies from their clinical trials. This positions Emily as the most advanced or statin ADC in the class, which provides us with a significant opportunity in breast cancer. We are pleased with the level of investigator interest and engagement we are seeing. And while TMBC is our immediate focus, given the clinical activity we have seen across all tumor types, we are excited by Emily's potential in other indications as well. And so, enrollment continues at our initial expansion dose of 67.4 milligrams per meter squared. We also continue to investigate doses up to 95 milligrams per meter squared in escalation of backfill cohorts delays. We're pleased to report that we officially amended our clinical trial protocol in late January as we seek to mitigate the proteinuria-related dose that we were seeing at high doses. We expect these efforts will help us identify a second dose for our second expansion cohort in post-TOPO1 TNBC later this year, and we plan to present additional data from dose escalation and backfill later this year as well. Moving on to other areas, we also have advanced the dose escalation portion of our Phase 1 clinical trial of XMT2056 in recent months. 2056 is our immunosynthin sting agonist ADC targeting a novel epitope of HER2. Later in 2025, we plan to present initial pharmacodynamic data from this clinical trial that helps to characterize this candidate's ability to selectively activate the sting pathway in HER2-expressing tumors. And finally, I would like to note that we continue to make solid progress in our dolosynthin research collaboration with J&J and our immunosynthin research collaboration with Merck KGA. With that, let's turn things over to Brian for some color on our financials.

Thank you, Marty. Beginning with our balance sheet, we ended 2024 with $134.6 million in cash, cash equivalents, and marketable securities. We continue to expect that 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 fourth quarter of 2024 was $19.3 million, which is down significantly from $32 million in net cash used in operating activities during the year-ago quarter. This decrease primarily reflects our portfolio reprioritization efforts, including the OPEX reductions we implemented in the second half of 2023 as part of our restructuring. Turning to our income statement, collaboration revenue for the fourth quarter of 2024 was $16.4 million, compared to $10.7 million for the same period in 2023. The year-over-year change was primarily related to increased collaboration revenue recognized under our agreements with J&J, Merck KJA, and GSK. Research and development expenses for the fourth quarter of 2024 were $22.3 million, compared to $21.5 million for the same period in 2023. For the most recent quarter, approximately $1.7 million of this spending was related to non-cash stock-based compensation. The year-over-year change was primarily related to increased costs associated with manufacturing and clinical development activities for Emily and XMT 2056, which were partially offset by reduced costs related to clinical development activities for our discontinued candidate, Upright. General and administrative expenses for the fourth quarter of 2024 declined to $8.9 million, compared to $10.1 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 was primarily related to reduced employee compensation expenses following our restructuring in 2023 and reduced consulting and professional services fees. And finally, Mursana's net loss for the fourth quarter of 2024 was $14.1 million, compared to a net loss of $19.5 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 touchtone phone. If you are 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 two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Jonathan Chang with Lee Ring Partners. Please go ahead.

Hi, this is Yander Li for Jonathan Chang. Thanks for taking my question. So the first question I have is that, could you share the latest progress on how you are mitigating the ASDLT elevation and proteinuria issue related to Emily? And how do you think that might increase your confidence in maintaining the dose intensity at a higher dose level? Thank you.

Thank you for the question. I'll start with the AST, then go into the proteinuria, and then get your last question. So with regards to AST, AST does not result in meaningful amounts of dose delays. And even if a patient does have a delay, it's only about a week. So at this point in time, AST is a transient reversible phenomena that is not having a meaningful impact on our ability to deliver dose. With regards to proteinuria, just to reiterate, that is primarily a challenge or leading to dose delays only at the highest dose range. So what we're currently doing is, as we mentioned, we've had an amendment to the protocol which does several things. One, it puts in place mitigation such as ACE inhibitors and ARBs early in a kind of a prophylactic manner to minimize the development of proteinuria. But importantly, in the setting of when proteinuria does occur, but it is asymptomatic in that a patient is not having edema, they're not having any serum hypoalbuminemia or serum creatinine changes, for those patients, we're able to maintain dosing by doing a dose reduction as opposed to a dose delay. So we look forward to testing that in the clinic to show that we are able to maintain dose intensity. But the clinical outcome will, I mean, we're doing the experiment now.

Got it. Just a quick follow-up on the protein urea. I think on the separate code, you did mention that it was related to podocytopathy. And you think that's caused by B7H4 on target or off target effect? Just curious about the mechanism. Thank you.

At this point in time, we believe it is off target. Other orostatin payloads that are not for B7H4 have been observed to have albuminuria, this same type of podocyte effect.

Thanks for taking my question.

The next question comes from Charles Hsu with LifeSci Capital. Please go ahead.

Hey, good morning, everyone. Thanks for taking our questions for the call and hope. Everyone had a great weekend. Regarding your dose expansion criteria of having patients with one to four prior lines of therapy, what's your sense of the distribution of patients that you might be getting that have fewer, call it one to two, as opposed to more, call it three to four prior lines of therapy? Thank you.

I think it's too early to get that read. I mean, we opened it in the study and we're still gathering data, so I think it would be premature for me to give guidance on what we think are the lines that are actually going to be in the population. One thing we can't clearly say is, per inclusion-exclusion criteria, those patients who had previously been on with 5, 6, or 7 are excluded from expansion. So at a minimum, it will ensure that patients don't have more than four prior lines. That is part of the protocol.

Got it. Great. Thank you for that. Maybe one quick follow-up right now. I guess then, you know, like I think you went through this a little bit as well, but, you know, to what extent will your second dose, your second go-forward dose, the identification of that be dependent, you know, on your ability to mitigate proteinuria? So you've already selected 67.3 in the intermediate range. And is there a scenario where you go for something, let's call it, in the middle to the higher end of your high dose range if your proteinuria mitigation works very well? Or is there an alternative scenario where you could end up maybe selecting even a separate dose beyond that? Thank you.

At this point in time, we are setting doses up to 95 milligrams per meter squared. So we are not exploring anything higher than that at this point in time.

Thank you for taking the questions.

As a reminder, if you have a question, please press star, then 1 to be joined into the question queue. The next question comes from Michael Schmidt with Guggenheim. Please go ahead.

Good morning. Thanks for taking our questions. This is Paul. I'm for Michael. I wanted to expand a bit on how you're currently thinking about establishing the final biomarker cutoff. Is it reasonable to expect where you land on TPS score to still capture roughly half of the TMBC population, or could there still be a meaningful swing factor in how you're thinking about B7H4 high?

I think while we continue to explore it, I would be surprised if it's outside of that 40% plus or minus. You know, 40 to 50 at the upper limit is most likely where we'll end up. To me, it would be very surprising if we end up with more than 50 or substantially less than 40. And with the TPS, I'm sorry, for proportion of the population. The TPS score could be, you know, That's TBD, what the actual percent TBS, tumor proportion score number is.

Got it. And then just as a follow-up, just can you set some expectations for the updated base one dose escalation and backfill data later this year? Which dose levels are in focus for enrollment? How many additional patients of data can we potentially see? And what's the sort of gating factor for when you'll be ready to try that update? Thank you.

Yeah, this is Jason. We haven't defined that. What we've said is we plan to present additional escalation and backfill data later on this year, as Marty alluded to. You know, we're looking at doses up to 95 mgs per meter squared, but we haven't defined how much incremental data would be in that readout.

The next question comes from Andy Shea with William Blair. Please go ahead.

Great. Thanks for taking our questions. Just one quick one for us. Just looking at the updated deck, I think the only thing that changed is the competitive landscape. Marty, I think you mentioned a little bit in your prepared remarks about the evolving competitive landscape, but I'm curious if you can kind of dive in deeper about some of the competitors that went to phase three, some dropped out, just you know, hoping to hear a little bit more from you.

Thank you. I'm going to let Brian give you a more detailed answer on that one.

Yeah. As Marty articulated, we believe that Emily is very well positioned in the B7H4 space. You know, as you noted with the departure of one of our competitors, we're the most advanced for statin B7H4 development. We're the only company that has shared initial positive efficacy data in that post-opo breast cancer setting. You know, as you remark, one competitor is moving into pivotal studies in a gynecologic tumor. I think we feel like this is very encouraging because it's an additional validation that you can see meaningful activity on that target. But several total competitors very much focused on ovarian and endometrial at this stage. So we believe One, in Emily's potential as monotherapy. We also believe that our safety and tolerability profile may afford us an opportunity to combine with things like platinum chemo and other ADCs. And we think long-term, as a set of development opportunities, some of our competitors might be very challenged to pursue those combinations. And so I think as we look at the overall competitive landscape, we view it very favorably.

The next question comes from Astika Gunawardin with Truist. Please go ahead.

Hey, good morning, guys. Thanks for taking my questions. Two quick ones, if I may. Could you give us a little bit of clarity on when we could expect some of the expansion cohort data to 67 megs? And then when you presented data earlier this year, we looked at three different intervals, the Q3, the Q4, and then a two-on, two-off. I'm curious if you're looking at other intervals, maybe like a three-on, one-off, or any other types of other formats as well, just to kind of set the clutch on the dosing. Thank you.

This is Marty. I'll answer the second one first. At this point in time, we are not studying any schedules beyond what we previously shared. We are continuing to explore different schedules at this point in time, but they're limited to the three we've already shared. And with regards to expansion, we are not giving any further details on timing of expansion other than to say that we are continuing to enroll patients and investigators remain enthusiastic about the study.

The next question comes from Colleen Cousy with Baird. Please go ahead.

Hey, y'all. This is Nick on for Colleen. Thanks for taking our question. So for XMT 2056, just wanted to ask what you have to show on the PD update and if there's a ballpark on how many patients or how much follow-up you might have and if we might see any early efficacy data at that time as well. Thanks.

We're not going into any detail beyond the fact that our primary objective will be to share pharmacodynamic data showing that we're getting activation of the same pathway in HER2 positive tumors. As far as any other details, we're not sharing at this point in time.

As a reminder, if you have a question, please press star then 1 to join the question queue. The next question comes from Justin Zelen with BTIG. Please go ahead.

Great. Thanks for taking the question. This is G. Don for Justin. I believe you had said you're going up to 95 mg per meter squared, but I do believe there was a 115 mg dose. Was there any reason why 115 isn't being explored further, and will we see a meaningful number of patients with proteinuria mitigation as part of this year's update?

Well, I think, well, first of all, we are not studying 115 any further. At the 115 dose, we did observe the, we saw it was reversible, but we did see grade 3 AST in two of the three patients. And while we could have potentially explored that further, we made the decision that we were not going to, because we were getting the exposures we were targeting at 95 and below. So our focus has been a cap of the 95 every four weeks, or the variations of that.

And on the second question, in terms of, again, the additional escalation and backfill data, you know, what we'll show is somewhat time-dependent, right, in terms of when we plan to share data. So we're not providing any additional specifics at this stage.

Got it. And maybe a follow-up. With the Pfizer program now discontinued, have you spoken to any KOLs who have been on both the Pfizer study as well as yours? And if so, how do they compare the two agents so far? Thank you.

Well, they're not going to give us details of confidential data from Pfizer. I think the main thing has been at this point in time, we had already heard from the investigators and the KOLs that Pfizer was not going to pursue their B7H4 in TNBC post-topo. That was known even before they discontinued the program overall. And so we were being approached by investigators to participate in our study because they have, you know, when they basically heard through the grapevine, to be frank, even before our data was disclosed, because we meet with these investigators, we have them under CDAs, They looked at our data as a promising opportunity in TMBC post-topo, and to be frank, it was the only game in town for their patients. So that's why we had several of those sites actively decide to join our study. As far as the actual data that Pfizer had in this population, they did not share that with us, other than to state that Pfizer was not pursuing this indication.

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

Thank you, operator, and thanks, everyone, for dialing in. We'll look forward to seeing many of you at the TD Cal and Healthcare Conference here in Boston tomorrow, as well as at Lyric's Healthcare Conference in Miami next week. That concludes our call, operator. Thank you.

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