Mersana Therapeutics Inc (MRSN) 2018 Q3 法說會逐字稿

Good morning, and welcome to Mersana Therapeutics' Third Quarter 2018 Conference Call. (Operator Instructions) I would now like to turn the conference over to the Mersana team. Please proceed.

Good morning. This is Eva Jack, Chief Business Officer at Mersana Therapeutics. Welcome to our third quarter 2018 conference call. We issued a press release earlier this morning reviewing our third quarter 2018 results and business updates, which will be covered on this call. A replay of today's call will be available on the Investors & Media section of our website. After our prepared remarks, we will open the call for Q&A.

This presentation contains forward-looking statements within the meaning of federal securities laws. These are not statements of historical facts and are based on management's beliefs and assumptions and on information currently available. They are subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially, including the risk that our clinical trials will not be completed on schedule, if at all, and the risks that our early encouraging preclinical results for XMT-1522 and XMT-1536 are not necessarily predictive of the results of our ongoing or future discovery programs or clinical studies. These risks are discussed in the company's SEC filings, including, without limitation, the company's annual report on Form 10-K filed on March 28, 2018 and subsequent filings. Except as required by law, the company assumes no obligation to update these forward-looking statements publicly even if new information becomes available in the future.

With that, I will turn the call over to Anna Protopapas, Mersana's Chief Executive Officer.

Thank you, Eva. Good morning, everyone, and welcome to our update call for the third quarter 2018. With me, in addition to Eva Jack, is Tim Lowinger, our Chief Scientific Officer; and Dave Spellman, our Chief Financial Officer. We continue to make very significant progress towards our goal of building a leadership position in ADCs. We have implemented important protocol changes in our 2 lead programs as we seek to optimize dose and dosing schedule. We also announced 2 new highly differentiated proprietary platforms that will allow us to explore additional benefits that our ADCs might deliver to patients. Our platform, led by Dolaflexin, provide the foundation for a productive research engine as we seek to continue to build a leading ADC development pipeline.

Let's now dive into the updates for our 2 clinical programs. I'll start with XMT-1536. The program continues to move forward rapidly, and we're encouraged by the emerging data. XMT-1536 is our first-in-class Dolaflexin ADC, targeting NaPi2b. NaPi2b's broadly expressed in epithelial ovarian cancer and non-squamous non-small-cell lung cancer. We have evaluated XMT-1536 on a once every 3-week schedule at dose levels up to 40 milligrams per meter squared. As we have announced before, we are now exploring a once every 4-week schedule with the objective of identifying the optimal dose and schedule for this drug. We have completed the first cohort of the every 4-week regimen at 20 milligrams per meter squared. Although early, we are encouraged with the safety, the tolerability and the efficacy patterns as well as the investigator enthusiasm we're seeing. We are now progressing toward rolling our next dosing schedule at 30 milligrams per meter squared. We expect to disclose complete data on Phase II dose selection and our plans for expansion cohorts in the first half of 2019. And we may share interim data on 1536 as the data matures and informs our phase II planning.

XMT-1536 is the only NaPi2 ADC in clinical development. And no commercially available test exists for characterizing NaPi2b expression. For this reason, we have developed an immunohistochemistry diagnostic test based on a novel and proprietary anti-NaPi2 antibody for characterization of patient tumors. We refer to this antibody as MERS67. We recently presented preclinical data regarding MERS67 at the World Lung Conference in Toronto. We reported on the potential of this antibody to demonstrate the differential expression of NaPi2b in different histologic subtypes of lung cancer. This and other data we have published demonstrate that MERS67 is a valid diagnostic test for characterization of patients and important component of our XMT-1536 clinical development strategy.

Let me know turn to XMT-1522, a Dolaflexin ADC targeting HER2-expressing tumors. XMT-1522 is being studied in patients with HER2-expressing breast cancer, non-small-cell lung cancer and gastric cancer. As a reminder, we have entered the clinic on a once every 3-week schedule. Dose escalated through 8 dose levels, ultimately reaching 37.2 milligrams per meter squared. We have revised the protocol to a once every 4 weeks schedule and have resumed a study at dose level 6, which is 21.3 milligrams per meter squared. We are pleased that the trials has resumed enrollment. We hope that the potential benefits to the profile we have seen on XMT-1536 from the once every 4-week schedule will translate to XMT-1522 as well. We project the Phase II dose to be between dose level 6, that's 21.3 milligrams per meter squared; and dose level 8, that's 37.2 milligrams per meter squared. And we expect to disclose data on dose and regimen selection and our detailed plans for expansion cohorts by mid 2019.

These 2 clinical programs address hard to treat solid tumors, where patients have very limited treatment options. We are evaluating the best ways to develop these novel medicines. As discussed previously, we are exploring dosing schedules with the objective of optimizing the profile for patients. We are also evaluating selection of target patients for expansion cohorts, both as a single agent, but also in combination with other treatments. We will update on the specific plans in early 2019.

Beyond XMT-1522 and XMT-1536, we're building a robust discovery pipeline. We believe leadership in ADCs involves a development of a range of core competencies and novel technologies. Bringing forward ADCs that truly transform patient outcome involves optimizing every component of an ADC and matching each target to the right antibody, the right linker, the right payload at the appropriate drug-to-antibody ratio. To date, no other ADC developer has developed the tools and capabilities to be able to achieve this goal. We are on the cusp of being able to achieve this type of optimization.

I will now turn the call over to Tim, our Chief Scientific Officer, to discuss the exciting discovery work we're doing.

Thanks, Anna. As Anna mentioned, we're continuing to innovate on new platforms with diverse payloads that will allow us to fine tune and optimize the properties of our ADCs and to create ADCs that seek to address a more expansive range of patient needs as we execute on our strategy of leadership in the ADC field. We're presenting our first data on 2 new ADC platforms at the Molecular Targets and Cancer Therapeutics Symposium in Dublin later this week. These advances are valuable additions to our technology portfolio and provide differentiating features which will help us have an increasingly adaptable approach and to expand into new patient populations and tumor types going forward. First, we will be describing a fully synthetic homogeneous ADC scaffold that we have developed and named [Synthimer], which maintains the favorable properties of Fleximer but also allows for precise control of drug-to-antibody ratio from 2 to 24. We've shown that Synthimer , combined with our existing DolaLock payload, a platform we refer to as Dolasynthen, allows for optimization of the therapeutics index for a given antibody through the precise control of optimal DAR matched for the specific target as well as the ability to create completely homogeneous ADCs. We're also disclosing our novel and proprietary DNA damaging payload, a platform we refer to as Alkymer, which broadens the potential patient reach of our ADCs while also allowing for the same precise DAR control. We've benchmarked our platform against other ADC DNA damaging agent platforms and have demonstrated improved efficacy as well as significantly improved tolerability. This platform will allow us to pursue indications such as colon cancer which are typically not responsive to auristatins. Mersana is currently evaluating ADCs with all 3 platforms, Dolaflexin, Dolasynthen and Alkymer, against our prioritized set of targets and antibodies to select the molecules with the highest potential clinical benefit to bring forward into the clinic, and we expect to share more information about our selection and optimization of our next ADC next year.

Beyond these 3 platforms that I just described, we're also excited about how we are now leveraging the approach to extend beyond cytotoxic payloads. A number of potent immuno-stimulatory payloads cannot be delivered systemically, and lend themselves to an ADC approach to achieve a wide therapeutic index. We're currently focused on developing such an ADC, and we're very encouraged by the early data that we've generated.

And with that, I will turn the call over to Dave Spellman, Mersana's Chief Financial Officer.

Thank you, Tim. Now for a recap of our third quarter 2018 financial results. We remained well capitalized with a strong cash position. Our cash, cash equivalents and marketable securities as of September 30, 2018 were $86.1 million compared to $125.2 million as of December 31, 2017. We expect this financial position will fund our operating plans during key milestones into 2020. Some of our key highlights for the third quarter include the following. Collaborative revenue for the third quarter 2018 was approximately $2.2 million compared to $6.3 million for the same period in 2017, driven primarily by a reduction in efforts in a changing timeline associated with the collaboration activities on XMT-1522 as per rule 606. Research and development expenses for the third quarter 2018 were approximately $15.2 million compared to $11.4 million for the same period in 2017, driven primarily by an increase in clinical and regulatory activities due to the progress of our lead programs and manufacturing costs to support future clinical development.

General and administrative expenses for the third quarter 2018 were approximately $4.4 million compared to $2.9 million for the same period of 2017, driven primarily by increased employee-related expenses due to an increase in headcount and increased professional fees. Net loss for the third quarter 2018 was $17.1 million or $0.75 a share compared to a net loss of $7.7 million or $0.35 a share for the same period in 2017. The weighted average common shares outstanding for the quarter ended September 30, 2018 were 23,152,019 and 22,242,129 for the quarter ended September 30, 2017.

And now I will return this call back to Anna for some concluding remarks.

Thank you all for joining us today. We look forward to continuing our update as we present meaningful preclinical data at the triple meeting later this week as well as the full Phase I readout of dose escalation in our XMT-1536 study in the first half of 2019. The steady stream of data will continue with the selection of the Phase II dose for XMT-1522 midyear next year. We will also continue to evaluate potential opportunities for partnership across our new and existing platforms as well as for XMT-1536. We remain confident that our novel technologies and clinical assets can provide a real benefit for patients with extremely limited options.

Thank you for your continued support of Mersana. We will now open the call to Q&A.

(Operator Instructions) Our first question comes from Earl DeSouza with H.C. Wainwright.

I've got 2, if I may, and the first on XMT-1536. If the 30 milligram per meter squared cohort progresses without hiccups, should we assume the next cohorts will be 50% higher or 33% higher?

That's a good question. I don't think we've made a final decision. And I think the protocol allows us -- leaves it to the investigators to really make that decision. As you know, we have dosed up to 40 milligrams per meter squared on the 3-week schedule. And I think we'll see how the 4-week schedule goes and decide whether we go all the way to 40, which is 33% increase, or whether we go somewhere in between. The data is going to drive our decision.

And in your prepared remarks, you mentioned you're encouraged by the emerging data and plans for some interim data. Could you clarify that, did I hear that correctly, that you're planning an interim data, so we don't really have to wait till middle of next year for the data? And any responses that you've seen? Are these platinum-resistant or refractory patients?

So as you can imagine, this is a dose escalation in oncology, so the patients are very advanced. They are platinum resistant. We have had patients that have had 10 or more lines of therapy. So very advanced patients, as is typical in these trials. So -- and your question was, we have said that we will release the full set of data in the first half. And I think if the data appears mature enough and really is representative of what we think is the emerging profile of the drug and we have opportunities, we might release interim data. But we have committed to release the full data set of the dose escalation in the first half of the year.

Our next question comes from Jonathan Chang with Leerink Partners.

First question, can you remind us what happened with the Roche NaPi2b ADC and reasons for confidence in XMT-1536?

Yes. Actually, the Genentech NaPi2b showed some promising data, and we have benchmarked our ADC against theirs, both in efficacy models as well as in -- versus their tolerability. And we have shown significantly better efficacy and significantly more improved tolerability in a wider therapeutic index. And I think that makes us very encouraged that we can have a superior product. Maybe I'll ask Tim if he has anything further to add, because he studied the 2 programs head-to-head in more detail.

Sure. So Jonathan, as you know, with Genentech, they did do a Phase II study in ovarian cancer. It was a small Phase II randomized versus Doxil. They saw what was about a 40% response rate and about a 50% improvement in progression-free survival relative to Doxil. However, because that was a very small study, they didn't reach their statistical endpoint. It's our understanding that they stopped the program for portfolio reasons, and they have published the results of that study. So one can look at the data that they generated in detail. What we also know in that regard, where we think we're differentiated and have even greater potential than the Genentech molecule is one, as Anna mentioned, we did benchmark ours head-to-head with the Genentech molecule. We saw a much greater efficacy. We also saw no neutropenia even at twice the dose that caused fatal neutropenia with the Genentech molecule. So we definitely don't anticipate that as a being dose limiting toxicity. And then I think what's also very important with our ADC is, because we have a high DAR, we have a much lower threshold for NaPi2b expression to see robust efficacy than the Genentech molecule had. And another point is multidrug resistance in, for example, up-regulation of Pgp, which can occur in ovarian cancer patients, for example. The Genentech molecule used monomethyl auristatin E, which is a Pgp substrate. And we've demonstrated with our DolaLock technology that our AF -- our statin F payload is not a MDR substrate. And so all of that taken together makes us feel very confident that our drug will compare favorably with the Genentech molecule.

Great, that's helpful. Second question, how much overlap is there between NaPi2b expression and folate receptor alpha expression in ovarian cancer?

Tim, I know maybe you can take that.

Sure. So that's something that we have investigated because of course we're following the immunogen molecule ADC as well. Based on the RNA databases, there appears to be essentially no correlation between NaPi2b and folate receptor. Both are broadly expressed across ovarian cancer, so there is some overlap in the patients. Many patients will express both, but they're not correlated. So patients that don't express the folate receptor are still likely to express NaPi2b.

Our next question comes from Jessica Fye with JPMorgan.

I have two. I wanted to make sure I heard correctly in some of the prepared remarks. I think you said you're identifying patients for expansion cohorts not just a single agent, but also in combo. I think that was related to 1522. So a, can you confirm if I heard that correctly; and b, maybe elaborate on what your -- what you would envision for potential combination cohorts. And then, second, also on 1522, can you clarify if we as the investment community will have seen the complete dose escalation as of mid 2019, when you select the go-forward dose? And if not, when will we see that complete data?

So on combinations, obviously, we are studying them and ready to understand where there are synergies and where we could -- what are the priority combinations we should pursue in development. And really, leveraging the unique aspects of our products. So you might remember that last year, both we and our partner Takeda published data that there is synergy with our platform, our Dolaflexin platform with PD-1s and our DolaLock payload induces immunogenic cell death. So we're, obviously, thinking about where does that potential combination play a role. Another combination which is probably not obvious, but is of interest to us, is a combination with trastuzumab. We're the only ADC that is based on a novel antibody that binds to a different epitope than trastuzumab and pertuzumab. And we have done some work and published some data that, in combination with trastuzumab and pertuzumab, we have synergistic effect, and have some in vitro data that shows that internalization of our ADC is more efficient when combined with trastuzumab. So those are 2 of the ideas we're considering with further studies, and really trying to decide where they fit in the future development of our products.

Could those combo expansion cohorts start in parallel with the single [agent] expansion cohorts?

I don't think we've made that decision yet. We are exploring these. We're doing additional preclinical studies, but we haven't yet made a decision.

Our next question comes from Mike Ulz with Baird.

Just one on XMT-1536. Can you just remind us the percentage of lung cancer and ovarian patients that express NaPi2b? And then secondly, what's your current thinking in terms of whether to select patients based on NaPi2b expression or not?

So based on the work we've done, a very large -- work we've done and others have done, we find that the antigen is expressed in 85% to 90% of ovarian cancer and adrenal carcinoma non-small cell lung cancer. So in the dose escalation, we are non selecting. And we are, retrospectively, measuring antigen expression. And we will decide, based on data, whether it is necessary in the later stages of development. We are ready with an assay that is validated and can be used if we decide that we do want to select patients down the road.

(Operator Instructions) Our next question comes from David Nierengarten with Wedbush Securities.

I guess I was little curious on the MERS -- I'm going to call it MERS67 antibody, and how quickly -- I mean, you say you're not using it to select, but I mean, I guess, is -- how close is the antibody ready for prime time, I suppose, for a diagnostic or for at least retrospective analysis in a larger study. And then, also as background for the 67 antibody, I was just curious too if the -- if you'd seen any difference in longitudinal expression? Or are there any differences in multiple lines of therapy? Or just kind of how deeply you've gone into expression in different tumor types.

I'll take the first one, and I don't know if Tim can take the second one, David. We have -- this assay is pretty robust. We've transferred it to a lab that really has quite a lot of experience in doing these assays. In parallel, we are -- we have developed a relationship with a diagnostic partner, and we are really taking a staged approach to developing what could be a companion diagnostic if we decide to go there. As you're aware, the companion diagnostic needs to be developed in parallel with the drug, so we are doing the work that's necessary to be ready to move it into later stages of development if we decided that that's the best way to develop the product. And we are already working with a partner on that.

And maybe I can just add to that, David. We have developed the assay such that we can really discern different levels of NaPi2b in samples. And we've disclosed data in sort of mouse clinical studies in many different patient-derived tumor xenografts and can see a correlation between NaPi2b expression and efficacy. We, in the preclinical setting, we have looked at longitudinal expression. We don't see a decrease in NaPi2b over time in those models. In terms of the clinical setting, the assay, as already mentioned, is validated and works very well. But to date, we've been applying it to archival biopsies, not the fresh biopsies. And we haven't been following NaPi2b expression in patients at this point over time, but it's certainly something that this assay would allow for in the future.

And I'm showing no further questions at this time. I'd like to turn the call back over to Anna Protopapas for closing remarks.

Thank you, everyone, for joining our call. In conclusion, we are making steady progress in building a leading ADC company. We're well positioned to make an impact for patients dealing with hard to treat cancers, have significant near-term milestones, and we look forward to sharing our progress with you in the next few months. Thank you again for joining the call.

Ladies and gentlemen, this concludes today's conference. Thanks for your participation, and have a wonderful day.