Mersana Therapeutics Q3 2023 Earnings Call Transcript

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November 7, 2023

There are 10 speakers on the call.

Operator

Good morning, and welcome to the Mersana Therapeutics Third 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 Purdett, Senior Vice President, Investor Relations and Corporate Communications.

Operator

Please go ahead.

Speaker 1

Thank you, operator, and good morning, everyone. Before we begin, please note that this call will contain forward looking within the meaning of federal securities laws. These statements may include, but are not limited to, those related to our platforms, product candidates,

Speaker 2

and the

Speaker 1

forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. These risks and uncertainties are discussed in our quarterly report on Form 10 Q filed with the Securities and Exchange Commission on August 8, 2023, and in subsequent SEC filings. Our filings are available at sec.gov and on our website, mersana.com. Except as required by law, we assume no obligation to update forward looking statements publicly even if new information becomes available in the future. On the call today, we have Mersana's President and Chief Executive Officer, Doctor.

Speaker 1

Marty Huber and our Chief Operating Officer and Chief Financial Officer, are Brian DeScheitner. With that, let me turn the call over to Marty to begin our discussion.

Speaker 3

Thank you, Jason, and good morning, everyone. It's a pleasure to be speaking with you about 8 weeks into my tenure as Mersana's CEO. Over the course of these 2 months, many investors and analysts have asked why I chose the role. So let's start there. It's really because of our people, platforms, product candidates and our financial position.

Speaker 3

Having served as a Mersana Board member since 2020 and having worked with several of our executives in a prior role, I knew this was a high caliber, high functioning team that was driven by a mission to make a real difference for patients. In addition, my role as a Director provided a clear view that from an innovation standpoint, we had advanced well beyond Dolaflexin, are 1st generation ADC platform and that we were making meaningful progress with our next generation platforms, Dolasynthen and Amy Nocenten. Not only that, but thanks in part to the difficult decisions that were made in the wake of Uplift, We also have a balance sheet providing an opportunity to accomplish our objectives. My time in the CEO role have only strengthened my conviction about these factors and my excitement about Risana's potential. Now let's move on to our core areas of focus.

Speaker 3

The first is XMT 1660, which was developed utilizing Dolasynthen, our next Generation cytotoxic ADC platform. Our preclinical work has shown that Dolasynthen has numerous potential advantages over Dolaflexin, Our first generation ADC platform that was utilized to develop UPREIT. Like many first generation platforms, Dolaflexin Some species within heterogeneous ADC mixtures, specifically hydrophobic high DAR subpopulations can negatively impact safety and tolerability, while having limited to no contribution in terms of efficacy. We spent years developing a technology that improved upon both 1st gen platforms and Dolaflexin. Specifically, we wanted the ability to identify an ADC outperformer and then produce that outperformer in a completely homogeneous fashion.

Speaker 3

We believe this would result in improved drug like properties, the potential for enhanced efficacy and further reductions in off target toxicity. Additionally, we wanted the ability to optimize both drug to antibody ratios and site specific conjugation approaches. Dolasynthen is the result of that effort. Across preclinical models, when we compare Dolasynthen ADCs to those from Dolaflexin and 1st gen platforms like forms like BCMAE, we see clear benefits in terms of pharmacokinetics, tumor delivery, efficacy and toxicity. XMT-sixteen sixty, our lead dolatifen ADC, now provides a near term will be able to demonstrate these advantages clinically.

Speaker 3

XMT-sixteen sixty is a DAR6 ADC targeting B7 H4, A member of the B7 family of immune checkpoint markers that's been shown to have limited expression in healthy tissue and overexpression in multiple tumor types with high unmet medical need, including breast, ovarian and endometrial cancers. At ESMO last month, initial clinical data were shared by others in the field, helping to validate B7 H4 as an intriguing target. In light of these early data, we believe there are opportunities to differentiate XMT-sixteen sixty from others in this space. Will continue to advance 1660 in the dose escalation portion of our Phase 1 trial. Additionally, we have begun to enroll patients in back fill cohorts at clinically relevant doses as part of our dose escalation design.

Speaker 3

By the end of this year, we expect to complete dose escalation with dose expansion planned for 2024. It also is worth noting that we have been making good progress in our collaboration with Janssen that focuses on discovering novel dolasynthen ADCs for up to 3 targets. Janssen has shared publicly that it chose dolasynthen are following a comprehensive review of the ADC landscape. Now let's move on to XMT 2056 and immunosynthetic. As many of you know, the ADC field has focused almost exclusively on attacking tumors with cytotoxic payloads for the past 2 decades.

Speaker 3

Several years ago, we began to explore how we might be able to leverage the benefits of an ADC approach to activate an innate immune response are in the tumor microenvironment. Immunosynthen is the result of this effort. Immunosynthen is an entirely unique platform that leverages a STING agonist payload with the goal of activating STING signaling in both tumor resident immune cells and in antigen expressing tumor cells. We initiated a Phase 1 clinical trial of XMT-two thousand and fifty six, are our 1st immunocence ADC candidate earlier this year. This trial was placed on clinical hold following a Grade have been dosed.

Speaker 3

This served as an unfortunate reminder That when developing truly novel mechanisms, the translation from preclinical to clinical can sometimes be less predictable. Will delve deeply into cytokine, pharmacokinetic and other clinical data from the patients dosed in this trial. The findings from the initial patients dosed in our Phase 1 clearly indicated that XMT-two thousand and fifty six is a much more potent in 8 immune stimulator in humans than we've seen preclinically. As a result, we developed a response to the FDA that included a lower starting dose in our Phase 1 dose escalation design. We were very pleased to share the news last week that the clinical hold on the Phase 1 trial of XMT-two thousand and fifty six have been lifted by the FDA.

Speaker 3

Our attention has now turned to reengaging with clinical sites to reinitiate enrollment. And finally, I would also like to mention that our analysis of the results from Uplift in ovarian cancer is nearing its completion. We plan to present the data at a medical meeting during the first half of twenty twenty four. In summary, I'm proud of all the recent progress that has been made by the Mersana team and my excitement about what lies ahead for the company continues to build. With highly differentiated platforms and clinical stage molecules, strong collaborations, a great team and a healthy balance sheet, Persona has an opportunity to make a difference for patients with a range of cancers, and we are working hard to deliver on this promise.

Speaker 3

We look forward to sharing more with you about our outlook for 2024 and key upcoming milestones in January. With that, let's turn things over

Speaker 4

to you, Brian. Thank you, Marty. Let me begin this portion of the call with a brief update on the restructuring and and the presentation actions we announced in July. These actions included a workforce reduction of approximately 50% and a wind down of are in the range of 3 related development activities. I'm pleased to report that the vast majority of our workforce reduction is already complete and that the remainder of our and upgrade bind down efforts will be substantially completed by the end of the year.

Speaker 4

This will set us up for a meaningfully simplified cost structure are in 2024. We ended the Q3 of 2023 with approximately $241,000,000 in cash, Cash equivalents and marketable securities, which compares to the balance of approximately $281,000,000 as of the end of 2022. Thanks in part to our restructuring and reprioritization efforts, we 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, I would like to begin with a reminder that the Q3 was a time of transition from our previous business strategy that focused heavily on Opry to our current strategy that focuses on our next generation platforms, XMT 1660, XMT 2056 and our collaborations.

Speaker 4

Net cash used in operating activities was approximately $46,100,000 for the Q3 of 2023. Collaboration revenue for the Q3 of 2023 was $7,700,000 compared to $5,600,000 for the same period in 2022. The year over year increase was primarily related to a greater contribution from our immunosynthetic collaboration with Merck KGaA. Research and development expenses for the Q3 of 2023 were $30,500,000 compared to $50,600,000 for the same period in 2022. This decline was primarily related to reduced manufacturing and clinical costs related to Opry and XMT-two thousand and fifty six and reduced employee compensation.

Speaker 4

Non cash R and D related stock based compensation expense for the Q3 of 2023 was $2,200,000 General and administrative expenses for the Q3 of 2023 were $12,900,000 compared to $14,600,000 during the same period in 2022. The year over year decline was primarily related to reduced consulting and professional service fees and reduced employee compensation. Non cash G and A related stock based compensation expense for the Q3 of 2023 was $1,800,000 During the Q3, we incurred $8,200,000 of restructuring charges related primarily to severance related costs and contract termination expenses. Mersana's net loss for the Q3 of 2023 was $41,700,000 compared to a net loss of $59,800,000 for the same period in 2022. That concludes our business update.

Speaker 4

Operator, will you please open the call to questions from the audience?

Operator

We will now begin the question and answer session. And our first question will come from Jonathan Chang of Leerink Partners. Please go ahead.

Speaker 2

Good morning and thanks for taking my questions. First question, can you give us a sense of when we might see initial XMT-sixteen 1660 clinical data. And second question, the comment about enrolling patients in backfill cohorts for 1660, can give us some color around that. How is enrollment progressing on the study? And are you still dose escalating?

Speaker 2

Thank you.

Speaker 3

Thank you, Jonathan. We're making good progress in the dose escalation phase of the trial and have begun to enroll these patients in the backfill Backfill cohorts, what I'd like to point out is the design of this, while we're not getting into details, is consistent with other standard kind of Phase 1 designs now where you and the group of patients at a dose or doses in order to get a better understanding for your recommended Phase 2 dose. Importantly, these patients are the same population as we're enrolling in the study, which is restricted to a subset of patients with TNBC, hormone receptor positive breast cancer and other specific tumor types. What we plan to share is a robust data set That will help differentiate XMT 1660 within the broader B7 H4 landscape. We plan to share our specific goals on that for 2024 are in the milestones in January.

Speaker 2

Understood. Thanks for taking the questions.

Operator

The next question comes from Colleen Cusi of Baird. Please go ahead.

Speaker 5

Great. Thanks. Good morning. Thanks for taking our questions and congrats on the progress. In the XMT-sixteen sixty study, I know you've done some work on expression level of in different tumor types.

Speaker 5

Are you measuring B7 H4 expression in the patients enrolled in the study? And would that biomarker data be available whenever you report initial data next year?

Speaker 3

We are collecting data on B7H4 expression. We are importantly, we are not are selecting patients though on B7 H4 expression. So it's all patients regardless of the level of expression. With regards to reporting of that data, we are it's certainly a factor we're considering. But at this point in time, we're giving no further details on exactly what will be in our Disclosure.

Speaker 5

That's helpful. Thank you. And on XMT-two

Operator

thousand and fifty six, just after all

Speaker 5

the work you've done and the data you've been able to gather, can Can you talk a little bit more about your latest understanding of what caused the patient death? And can you talk a little bit about the next steps between the recent lift of clinical hold and then restarting of the enrollment.

Speaker 3

Sure. Well, what we did is we looked deeply into our what we have for the data, we looked at our pharmacokinetics and essentially looked across the board for the clinical data as well as in comparison to our preclinical data. And one of the things we realized that XMT-two thousand and fifty six was a much more potent innate immune stimulator in humans Than we had thought based on the preclinical data. So while we're not going into the granular details, going to a lower dose was an appropriate strategy. And importantly, it shifts our whole way we look at the therapeutic index.

Speaker 3

So importantly, we still think we're going to have been able to achieve a positive therapeutic index in patients going forward. With kind of regards to the details is, it is an Amendment to the protocol. So in addition to reengaging the sites to start enrolling, there are some technical details when you amend the protocol for Should you like lab kits and things like that, that you have to update as part of that amendment process.

Speaker 5

That's helpful. Thank you. And then just last one from us. When you restart the STNG study, are you changing the enrollment criteria at all?

Speaker 3

The primary effect was on lowering the starting dose. There are some minimal changes, but really it's about the starting dose.

Speaker 5

Great. Thanks for taking our questions.

Operator

To ask a question, please press star then 1. And our next question will come from Ashik Novak of Citi. Please go ahead.

Speaker 6

Hi, guys. Thanks for taking my questions. I guess, maybe first, you alluded to you made some comments alluding to the idea of Differentiation for your program in the B7 H4 landscape. I think it might be helpful to kind of review how you're differentiated From a clinical profile perspective, but also how you expect to be differentiated on a clinical development profile? Any color there would be helpful.

Speaker 6

Thanks.

Speaker 4

Sure. Maybe I can take that. I think there's 2 companies that are out there in the B7 H4 We've compared dolacinfin ADCs versus the VC MMAE ADCs Extensively preclinically and have shown preclinically that our platform can deliver payload to the tumor much more efficiently and effectively. And In addition, we've shown in our past clinical presentations that our payload appears to avoid the severe neutropenia and peripheral neuropathy That does tend

Speaker 3

to be dose

Speaker 4

limiting across MMAE programs. When you move to Panso GSK Kay and AZ, frankly, those are all using Topo 1 payloads. There's Increasing evidence from compresses just this year that Topolone pretreated patients can develop resistance

Speaker 3

And when you look at

Speaker 4

this landscape and in particular, sort of the faster market and largest opportunities in breast cancer With HER2 and Trodelbi becoming standard of care, we believe this could be a consideration. And frankly, I think We believe this is also evidenced by some commentary about focusing on gynecologic tumors for that ADC. I think another consideration is just the hematologic toxicities that you see for topo-1s that are dose limiting in similar ways.

Speaker 6

Got it. That's very helpful. Maybe one more on XMT-two thousand and fifty six. You're obviously reducing the dose. I guess, what gives you confidence you'll be able to strike a sort of balance between HER2 coverage, but not Overstimulating the STING pathway, which might, of course, cause some immunologic safety issues.

Speaker 6

I guess some color on your thoughts on the therapeutic window might be helpful here.

Speaker 3

We're not going to go into detail here, but I think what's important is when we Look at the amount of STING agonists and the effects downstream. In human systems, it's much more sensitive. So essentially, the idea is that you'll shift it. But we believe that evidence of activation at the tumor cell level will also be are shifting as well. So that it should move so basically, the therapeutic index shouldn't fundamentally change.

Speaker 3

It just should shift to a lower dose range. But we are at this point in time, some of that data, we're not I mean, we're We need to discuss how we're going to have that data available. That will be part of our January discussion.

Speaker 6

Okay, got it. Thank you very much.

Operator

The next question comes from Kaveri Uhlman of BTIG. Please go ahead.

Speaker 7

Yes, good morning. Thanks for taking my questions. Can you provide any additional color on what's your 2026 cash runway include? Does it include any additional trials beyond dose expansion 4,160 and Phase 1,42956.

Speaker 4

So thank you, Cary. Our cash runway guidance is based on our current operating plan commitments, which Include the early clinical development of both 1660 and 2,056.

Speaker 7

Got it. And for 2,156, can you tell us about the HER2 epitope? How validated it is and PERJETA doesn't work well if patients are retreated with it. Is it something that's known for 2,056 epitope?

Speaker 4

So maybe I'll take that. The HER2 epitope is distinct from that targeted by either pertuzumab or Herceptin, but it's obviously on HER2.

Speaker 3

It does not cross react With those sites. Correct.

Speaker 7

But is it known about PERJETA? It doesn't really work in patients if you retreat it, whereas Herceptin, you can keep giving patients even if they progress, they still respond. Is it something now? Why is that and if your epitope has similar biology as stepped in.

Speaker 3

We intentionally targeted a different Atope, because the in principle there is we should be able to target patients who have previously undergone treatment with a HER2 So it was part of the thinking was to intentionally go to a different part of the antigen.

Speaker 7

Got it. Thanks for taking my question.

Operator

The next question comes from Boris Peaker of Cowen. Please go ahead.

Speaker 8

Great. My first question on 16/60, can you discuss the concept of target optimized drug to antibody ratio? I just want to understand how do you know what the ideal

Speaker 3

Thank you. What We've done as part of our preclinical program, and this is public data, is for a given target, We create a molecule with a range of DAR species. And then what we can look at is, for example, if you look at DAR2 versus DAR12 versus

Speaker 8

Got you. And I guess, for 2,156, so I understand the goal is to deliver the immune stimulator to the tumor microenvironment. I'm curious, is it possible somehow to tell if the activity that you're seeing is systemic in nature? Let's say the payload is coming off or just working systemically? Or is it actually starting in the local tumor microenvironment?

Speaker 3

Based on the limited data we have to to date, we cannot draw a conclusion on that.

Speaker 8

Great. Thank you very much for taking my questions.

Operator

And our next question comes from Ashtica Boonavardi of Truist. Please go ahead.

Speaker 9

Hi, this is Karina Prostica. I had a question on the B7 H4 competitor data that was presented at ESMO. Does that make you more inclined to pursue certain indications? And the mitral, for example, had only a 6% ORR, but this was a CR. Can you just share color on that, please?

Speaker 3

Sure. I think we want to be a little careful in drawing conclusions prematurely about the specific tumor types outside of breast, Because the numbers were fairly limited across the board, we also know in some of those other tumor types, the levels of BXB7 H4 expression may not be quite as common as it is, for example, in triple negative breast. So we at this point in time, while Breast cancer, especially triple negative is probably one of the places where it's going to be the easiest to get a clear understanding of the data. The other tumor types, we would say, is a little bit premature. We do think they're still interesting.

Speaker 3

So we still think there's an opportunity for 1660 in tumor types beyond triple negative breast.

Operator

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

Speaker 3

Thank you, operator, and thanks, everyone, for dialing in. We hope to see some of you later this week in New York at the Truist Biopharma Symposium Looking forward to keeping everyone apprised of our progress. That concludes our call, operator.

Operator

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

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Key Takeaways

  • Dolasynthen platform demonstrated superior pharmacokinetics, tumor delivery and toxicity profiles versus first-generation Dolaflexin in preclinical models, enabling precise control over drug-to-antibody ratio and site-specific conjugation.
  • XMT-1660 B7-H4 ADC is advancing through dose escalation with backfill cohorts enrolling now, with dose escalation expected to complete by year-end and dose expansion slated for 2024.
  • XMT-2056 STING agonist ADC had its FDA clinical hold lifted after data review, the protocol has been amended for a lower starting dose, and enrollment at clinical sites is set to resume.
  • Restructuring actions, including a ~50% workforce reduction and R&D reprioritization, have simplified the cost structure and, with $241 million in cash, fund operations into 2026.
  • Analysis of Uplift ovarian cancer trial results is nearing completion, with data planned for presentation at a medical meeting in the first half of 2024.
AI Generated. May Contain Errors.
Earnings Conference Call
Mersana Therapeutics Q3 2023
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