Mersana Therapeutics Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 28, 2024

There are 14 speakers on the call.

Operator

Good morning, and welcome to the Mersana Therapeutics 4th 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.

Speaker 1

I would now like

Operator

to turn the call over to Jason Fredette, Senior Vice President, Investor Relations and Corporate Communications.

Speaker 2

Thank you, operator, and good morning, everyone. Before we begin, please note that this call will contain forward looking statements within the meaning of federal securities laws. These statements may include, but are not limited to, those relating to our platforms, product candidates, business strategy, clinical trial execution and results, business development efforts and cash runway. Each of these forward looking statements is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. These risks and uncertainties are discussed in our quarterly report on Form 10 Q filed with the Securities and Exchange Commission on November 7, 2023, and in subsequent SEC filings.

Speaker 2

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 today's call, we have Mersana's President and Chief Executive Officer, Doctor. Marty Huber and our Chief Operating Officer and Chief Financial Officer, Brian De Scheitner. 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 great to be speaking with you again. Let's start today's call off with a brief description of our high level aim here at Mersana. Although ADCs have firmly established a position at the forefront of oncology, there are significant platform and payload limitations that we believe are preventing this therapeutic class from realizing its full potential. At Mersana, we're focused on bringing forward innovations to address these limitations to meaningfully improve the efficacy and safety of ADCs.

Speaker 3

Our goals are, 1st, to minimize dose limiting platform toxicities. We believe the achievement of this goal could allow us to maximize the monotherapy potential of cytotoxic ADCs and also allow them to be used effectively in combination with other standard of care treatments, something that simply isn't possible with many of today's ADCs. 2nd, we aim to avoid resistance mechanisms that appear to be hampering certain ADCs. And third, we're striving to extend the field well beyond cytotoxics and establish an entirely new class of ADC therapies that elicit a targeted innate immune response to combat cancer. With that as a backdrop, let's turn our attention to the progress we're making in accomplishing these objectives.

Speaker 3

And let's begin with our proprietary orostatin payload that's being used in our next generation cytotoxic ABC platform, Dolacentthan. When we developed this payload, one of our core objectives was to avoid the dose limiting neutropenia and peripheral neuropathy that is reported with ADCs based on the VC MMAE platform and other 1st generation ADC platforms. Our payload has controlled bystander effect, meaning that it initially is membrane permeable and capable of bystander killing. However, it has also been designed to be enzymatically converted to an active metabolite that is much less membrane permeable, resulting in its accumulation in the tumor and avoidance of off target toxicity. While we view our payload as a core differentiator and advantage, the same can be said for the platform we're using to deliver that payload, dolasynthen.

Speaker 3

We have presented extensive preclinical data in the past demonstrating important advantages for dolacinthin ADCs against ADCs produced using our own first generation platform, Dolaflexin and other platforms like BCMMAE. 2024 provides us with the opportunity to begin presenting the clinical data. Next week in Barcelona at the European Society of Gynecological Oncology, otherwise known as ESSCO, clinical data will be presented for 2 discontinued product candidates, UPRE and XMT-fifteen ninety two. Both of these candidates utilized the same NAPI2B antibody and the same proprietary payload with controlled bystander effect. However, UPRE was developed using Dolaflexin and 1592 was developed with Dolasynthen.

Speaker 3

We believe these clinical data help to affirm that the severe neutropenia, peripheral neuropathy and ocular toxicity that is frequently observed in trials of ADCs based on other platforms and payloads are uncommon with our payload. We also believe they clearly show that Dolasynthen further reduces platform toxicities compared with Dolaflexin. Following these presentations in mid-twenty 24, we plan to share our initial clinical data for XMT-sixteen sixty, our B7 H4 targeting dolacinthin ABC. We continue to be pleased with the progress we're making in our Phase 1 trial evaluating the safety and tolerability of XMT-sixteen sixty as a single agent in patients with solid tumors, including triple negative and estrogen receptor positive breast cancer as well as ovarian and endometrial cancers. The dose escalation portion of the trial is ongoing.

Speaker 3

In fact, we just recently escalated to a dose of 59 milligrams per meter squared, which is the highest dose that we have investigated clinically with a dolacinth ADC. A maximum tolerated dose for XMT 1660 still has not been established. In addition to continuing escalating dose, we are also continuing to enroll patients in backfill cohorts to optimize dose and schedule. As is typical for Phase 1, we're enrolling a heavily pretreated patient population. Today, single agent chemotherapy is the standard of care for these types of patients and their prognosis is exceedingly poor.

Speaker 3

For instance, the objective response rate in late stage triple negative breast cancer is estimated to be approximately 5% or less with a duration of response that is less than 4 months. Today, most breast cancer patients here in the U. S. Are receiving HER2 and TREDELBI early in their treatment. An increasing amount of data is emerging that shows patients are developing resistance following their first topo-one ADC treatment.

Speaker 3

These factors are presenting an urgent unmet need for new ADCs with alternative payloads that do not share these resistance mechanisms. We are enrolling many patients who have previously received at least one of these topo ADCs in our Phase 1 clinical trial and we're looking forward to sharing initial data mid year so we can begin to clinically characterize XMT-sixteen sixty's efficacy and safety profile. Now while we're very excited about XMT 1660 and dolacinfin, we believe IO may be the next significant frontier for ADCs. Our immunosynthen platform is designed to harness the power of STING and overcome the historic limitations of free systemic STING agonist and intratumoral injections. This platform has the potential to deliver a targeted and impactful 1, 2 punch by activating STING in a target dependent manner in tumor cells and in tumor resident myeloid and dendritic cells while also minimizing the risk of systemic exposure.

Speaker 3

XMT-two thousand and fifty six is our lead immunosytheon ADC. We're currently in the process of restarting our Phase 1 trial of this HER2 targeting ADC following a lift of the clinical hold on this trial by the FDA in the Q4 of 2023. In Phase 1, we plan to enroll patients with a range of different HER2 positive tumors, including breast, gastric, colorectal and non small cell lung cancer and we're looking forward to advancing dose escalation in 2024. In addition to our independent programs, over the past 2 years, we also have entered into collaboration agreements with Johnson and Johnson, Merck KGaA and GSK. We remain very much engaged with these companies as we seek to maximize potential of our ADC platforms and product candidates.

Speaker 3

So in summary, Mersana entered 2024 with energy and excitement. We have 2 differentiated ADC platforms, platforms that we think could address significant limitations for today's ADCs. We also have 2 differentiated clinical stage assets, an upcoming data readout on XMT 1660 and a strong balance sheet. On this latter point, let me turn the call over to our Chief Operating and Financial Officer, Brian DeScheitner to share more detail.

Speaker 4

Thank you, Marty. Let's begin with the financial highlights for the Q4 of 2023. We ended the year with approximately $209,000,000 in cash, cash equivalents and marketable securities. Net cash used in operating activities was approximately $32,000,000 for the Q4 of 2023, which is down significantly from prior quarters, thanks to our restructuring and UPRE wind down efforts. From a cash expenditure standpoint, we can expect to continue realizing benefits from these efforts in 2024.

Speaker 4

As a result, our capital resources are expected to be sufficient to support our current operating plan commitments into 2026. Please note that our cash runway guidance does not assume any potential milestone payments from our current collaborations or proceeds that we may realize from future collaborations. Turning to the income statement, collaboration revenue for the Q4 of 2023 was $10,700,000 compared to $14,700,000 for the same period in 2022. The year over year change was primarily related to the timing of research activities for the Johnson and Johnson collaboration and achievement of a Johnson and Johnson early development milestone in the Q4 of 2022. Research and development expenses for the Q4 of 2023 were $21,500,000 compared to 45,700,000 dollars for the same period in 2022, approximately $2,200,000 in non cash stock based compensation expenses and $3,700,000 of external costs related to our Uproot wind down efforts were included in the R and D line in the most recent quarter.

Speaker 4

The year over year decline in R and D was primarily related to reduced manufacturing and clinical costs related to UPREIT and XMT 2,056 and reduced employee compensation costs, partially offset by increased clinical costs related to XMT-sixteen sixty. General and administrative expenses for the Q4 of 2023 were $10,100,000 compared to $14,800,000 during the same period in 2022. Approximately $1,900,000 in non cash stock based compensation expenses were included in G and A for the most recent quarter. The year over year decline in G and A expenses was primarily related to reduced consulting and professional fees and reduced employee compensation as a result of the restructuring plan we announced in July 2023. Mersana's net loss for the Q4 of 2023 was $19,500,000 compared to a net loss of $44,900,000 for the same period in 2022.

Speaker 4

That concludes our business update. Operator, would you please open the call to questions from the audience?

Operator

Thank you. We will now begin the question and answer session. The first question comes from Tara Bancroft with TD Cowen. Please go ahead.

Speaker 5

Hi, good morning. So maybe you could go into specific expectations for the mid year 16/60 update and specifically given the 1592 data that are coming next month, what takeaways can we use from that to take forward and increase our confidence in the 16/60 data based on the new platform technology?

Speaker 6

Thanks. Thanks, Tara. So this is Jason. I'll start that. The midyear data will be efficacy and safety tolerability data.

Speaker 6

We haven't specified exactly what will show just yet, but mid year is the guidance as you noted. Maybe I'll turn it over to Marty for the second part of the question.

Speaker 7

And just so I make sure I answered your questions, I understand it is what can we learn from the EZCO data set on 1592. I think as we had noted was, it's the same NAPI2b antibody, the same payload. The only difference is the scaffold, the Dolaflexin versus the Dolasynthen. And what we will show is the safety data from 1592 demonstrates what we would expect to see with our platform related effects. And what we observed or will show in the data is that, 1, we continue to show an absence of peripheral neuropathy, absence of neutropenia, absence of ocular toxicity.

Speaker 7

But in addition, we plan to show that the data with 1592, the dolacinthin also has lower risk of some of the other platform toxicities that were observed with UPREIT. And those details will be apparent between the two presentations.

Speaker 5

Okay. Thank you.

Operator

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

Speaker 1

Hi, guys. Good morning. Thanks for taking my questions. First question, can you just remind us the decision making process behind what happened with the 2nd gen NaPi2b program? And then just following up on the previous question, what the lessons there could be for the ongoing B7 H4 program?

Speaker 1

And then the second question, can provide any color on how enrollment has progressed on the B7 H4 study and where you are in dose optimization? Thank you.

Speaker 8

Thank you, Jonathan. That sounds like 3 questions, but we'll take them in turn. So with respect to 1592, the original premise for that program was in lung cancer. And over the course of our explorations in lung cancer, we came to realize that the prevalence of the biomarker is much lower in lung cancer than was reported by the literature and was reported in ovarian cancer as well. And so that very much given our cost of capital and the other opportunities available to us in our portfolio drove the decisions around strategic reprioritization for 1592.

Speaker 8

I think I'll pass it to Marty

Speaker 5

with respect to the 1660 question.

Speaker 7

Yes. And with regards to learnings for B7H4, one of the important observations from both 1536 and 1592 is that there was pneumonitis that we believe is associated with the presence of NAPI 2b on type 2 pneumocytes that are in the lung. One of the things we've learned as we look at B7 H4, there is not that same level of expression or any expression on the pneumocytes for B7 H4. And one of the reasons we were pleased to see the data from ESMO from Cgen and from Hanzo at ESMO, the last data set, they showed no evidence of target mediated toxicity. So I think an important learning for us is that for the pneumonitis that we observed with APU2B is most likely on target and we look forward to our data set in with 1660.

Speaker 7

With regards to your enrollment question, I think we've essentially now escalated beyond dose level 6. We are now at 59 milligrams per meter squared. We are continuing to enroll in the backfills. As we've noted, it's up to 12 patients are in these backfills at dose levels. I think the other thing we've highlighted that we are looking at potential Q3 as well as alternative Q4 schedules.

Speaker 7

And so we remain we believe we're continuing to optimize dose and schedule for 1660.

Speaker 1

Got it. Thank you.

Operator

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

Speaker 9

Hi guys. Thanks for taking my questions and congrats on the progress. I guess a couple for me. You said you're starting expansion cohorts for XMT-sixteen sixty in the second quarter. I guess when those cohorts get up and running, will you share which specific tumor types are being moved into the expansion phase?

Speaker 9

And also at that point, will you share what the go forward dose will be? Or will we need to wait for those details at the midyear data update? Thanks.

Speaker 6

Yes. Good questions. We haven't predefined that, I would say. So stay tuned on that front. We're operating in a competitive environment in the B7 H4 space, so TBD on that.

Speaker 9

Okay, understood. And then maybe one more on 2,156. It sounds like you're getting that study up and running again, but I'm just wondering what the gating factor is to getting dosing going or my misunderstanding and that's already happened?

Speaker 7

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

Speaker 7

Those are underway.

Speaker 9

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

Operator

Thank you. The next question comes from Colleen Clusi with Baird. Please go ahead.

Speaker 5

Hi, good morning. Thanks for taking our questions. Can you remind us how you're dealing with the B7 H4 biomarker in this Phase onetwo dose escalation? Are you measuring at baseline, but not pre selecting patients? And then would we expect any of the biomarker data in the mid year update?

Speaker 7

This is Marty. At this point in time, we are gathering data pretreatment on B7H4 expression. However, we are not using that to select for patients. Patients are enrolled regardless of the outcome of the test. With regards to data display, as Jason noted, we are in a highly competitive environment.

Speaker 7

Of note, neither Pfizer nor Hansek shared their biomarker data. And so we will have to make a judgment call at the midyear data presentation, will we or will we not share that data.

Speaker 5

Great. That's helpful. Thank you. And then on 2,156, how involved is GSK at this point in kind of restarting the study?

Speaker 8

Well, maybe I'll take that. So the product is has an option with GSK as you will recall and they have not exercised that option.

Speaker 6

And so we

Speaker 8

retain decision making control what we do in that product. But that said, GSK has been very engaged in the process. We're very pleased with the partnership.

Speaker 5

Great. Thanks for taking our questions.

Operator

Thank you. The next question comes from Kovari Polman with BTIG. Please go ahead.

Speaker 10

Hi, this is Christian. I'm on for Kovari today. So actually the previous question answered parts of what I was wondering, but for the Phase 1 trial for 1660, how much overlap do you expect to see between B7 H4 and some of the other ADC targets such as TRO2 folate receptor alpha and CDH6? And my second question for the STING ADC, could you tell us how you're thinking about 2,156 potentially fitting into the current treatment landscape? Is it mostly going to be a combination drug?

Speaker 7

Hi, it's Marty. With regards to 1660, while we don't have detailed data on that yet, one thing we do know is there's a trend for B7 H4 and PD L1 on the tumor to not be overlapping. Population tends to be fairly separate. With regards to folate receptor alpha, do not have any specific data available at this point in time. And I wouldn't want to speculate on that.

Speaker 7

But there is no we're not aware of any overlap in biology between the two targets. But as far as specific data that says whether the populations overlap or not, I can't give you that answer today.

Speaker 10

Okay, got it. Thank you.

Speaker 7

And with regards to the CING, we are certainly thinking in terms of combinations for 2,156. We think one of the advantages of having a locally tumor directed STING agonist is that that would allow you to do combinations with other systemic treatments. For example, you could give potentially an anti PD-one in a setting where you normally would not be able to because systemic STING activation combined with the PD-one would just be really too toxic for patients. So that is one of our long term strategies is surely want to show activity monotherapy, but ultimately we think it will be a combination agent. And one last point on that, the actual epitope for HER2 is different than the HER2.

Speaker 7

So you could, in theory, actually do a HER2 combo.

Speaker 10

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

Speaker 6

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

Speaker 10

Okay. Thank

Operator

you. Thank you. We have the next question from Michael Schmidt with Guggenheim. Please go ahead.

Speaker 11

Hey guys, good morning. Thanks for taking my questions. Just a couple more on 1660. In the Phase 1 study, could you comment on how the tumor histology is in the study compare perhaps to what CJ and Pfizer have shown in Phase 1? And I think they had a pretty decent signal in breast cancer.

Speaker 11

Is that is there overlap in sort of patient types in your study and theirs? And then just as we think high level, you mentioned you're planning to initiate the expansion cohort soon. Any views on just general positioning longer term relative to the CGen ADC in terms of differentiation perhaps? Is it mainly lower tox on your end, increased efficacy or both perhaps? And then how do you think about differential development opportunities versus what they've been doing?

Speaker 11

Thanks so much.

Speaker 7

Good morning, Michael. I'm going to take the first part of your question, then I'm going to turn it over to Brian to kind of talk to you about how we're thinking about the molecule longer term. With regards to the current data, we are enrolling patients with triple negative breast cancer, hormone receptor positive breast cancer, endometrial cancer and ovarian cancer. So as part of the dose escalation, any one of those four histologies is eligible for the study. Once we get into backfill, we can be a little more specific.

Speaker 7

And while we have not given detailed information on who we are enrolling, I think a couple of points can be made. Clearly, triple negative breast cancer is an area of high unmet medical need in which after patients progress on TRIDELV and or in HER2, there's essentially nothing for those patients. So you will while we're not giving the details of how many of each, that is a patient population that we will have in our data set.

Speaker 8

And if I can just expand on your question about differentiation and positioning. Smarty remarked earlier, one of the things that we're looking for in ESMO data was any indication of a B7 H4 on target toxicity, we didn't see that, which is nice validation of both the safety and the efficacy from those abstracts. As a reminder, we've compared dolacinth and ACCs versus BCMMAE, ADCs extensively preclinically. And we show that our platform preclinically can deliver payload to the tumor much more efficiently and effectively. In addition, we've shown in our past clinical presentations for other product candidates that our payload appears to avoid the severe neutropenia for myopathy that tend to be dose limiting with MMAE.

Speaker 8

And so when you think about what that means, it's about expanding what an ADC can do in the clinic and whether that's combinations or earlier lines to create very strong arrangements. I think if you contrast with the Hanzo GSK and sort of the topos in general, keep in mind that our payload is very much orthogonal to that class. And many patients in this setting are receiving prior topo ADC. And so we believe this could be a consideration in the future landscape and you see echoes of that in sort of commentary around the HANSO data. And the HANSO program also seems to have relatively profound myelosuppression that raises similar considerations about combinations and moves into earlier lines.

Speaker 8

So we think that the landscape that's been established by that ESMO data disclosure, leaves opportunity.

Speaker 11

Great. Thanks so much.

Operator

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

Speaker 12

Hey, good morning guys and thanks for taking my questions. You guys just very nicely laid out how semi day design features for 1660 could be making a difference. And we look at things like duration of response and duration of therapy as good measures to confirm if that's actually had a clinical difference. So maybe I'll ask you guys this, given what we know about some of the B7 H4 AGCs, what kind of duration of response or duration of therapy would you be looking for in 16/60 to say, this is actually making a difference in the clinic with the patients treated with 1660?

Speaker 7

Hi, it's Marty. 1, I would like to put a little caveat on. Looking at duration of response in Phase 1 data sets even with pretty robust fulsome data sets is always challenging just because the number of responders to get a precise point estimate is always relatively limited. So we want to be a little careful about getting too obsessed on that early on in the development program. However, we do agree it's a very important question.

Speaker 7

And if you think about it, the standard of care chemotherapy has a 5% objective response rate. And by the way, that's not even in a that's the control arm from the current ADCs. That's not post Tridelvia or post INHER2. And importantly, the duration of response for that control arm was less than 4 months. So I think a DOR usually when we think about these things, you'll like to see a 6, 5, 6.

Speaker 7

One of the things that we were very excited about from UPRE is while overall the response rate was lower, the one of the things you'll see in the data is that the duration of response for those patients who did respond to UPRE was over 7 months. So we think there's an opportunity to increase DOR. I think it's just going to be challenging to clearly demonstrate that in the initial data

Speaker 12

set. Got it. That's very helpful. I'm also wondering, you talked about how resistance emerging from prior payload exposure is an issue that's emerging a lot more in the breast cancer patient population. Will the Phase 1 data set, the dose escalation data set give us any sort of clues or be able to parse out when patients who are developing resistance to cryoparathyalote and show us what the efficacy of 1660 looks like in there?

Speaker 12

Or is that just too much to try and piece out of that, James, that's coming up?

Speaker 6

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

Operator

We get the next question from the line of Brian Cheng with JPMorgan. Please go ahead.

Speaker 13

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

Speaker 8

Sure. Well, our cash runway guidance is based on our current operating plan commitments. That does include the early clinical development of both 1660 and 2,056. But if I sort of double click on your question, as you know, we don't provide forward looking financial guidance, but you'll note in our press release and our remarks in the K that we've reported a significant reduction in OpEx in Q4 and have since then substantially completed our Opry wind down. So we think this meaningfully simplified cost structure is going to enable our available funds to support our operating plan commitments into 2026.

Speaker 13

Great. And then, second is on the dose escalation work that you're doing for 1660. How does the latest escalation to 59 mg per meter square compare to your peers who are also targeting B7 H4? Maybe you can also provide some color on the expected therapeutic window that you expect to see compared to your peers? Thank you.

Speaker 7

We want to be careful on directly comparison across the ADCs for there's several differences in these molecules. I mean, not only do they have different amounts of payload, we have a DAR6, but in addition, the potency of the payloads is different. And then one fundamental difference is because of our scaffold, our Dolce and the platform with the approved drug like properties and antibody like half lives, we end up having allowing a less frequent dosing, either Q3 or Q4. But what that's associated with, if you think about it is, it's a slower clearance of the molecule because it has an antibody like half life. So it gets very complicated to try to do a direct detailed comparison until we get the full data disclosure and then we can start having that conversation.

Speaker 13

Great. Thank you, Marty. Thanks.

Operator

Thank you. 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 7

Thank you, operator, and thanks everyone for dialing in. We hope to see some of you in the next couple of weeks at ESCO as well as Cowen and at Lyric. So that concludes the call, operator. Thank you.

Operator

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

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Mersana Therapeutics Q4 2023
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