Mersana Therapeutics Inc (MRSN) 2018 Q4 法說會逐字稿

Good morning, and welcome to Mersana Therapeutics' Fourth Quarter and Full Year 2018 Conference Call. (Operator Instructions).

I would now like to turn the call over to Sarah Carmody, Executive Director, Investor Relations and Corporate Communications. Please proceed.

Good morning. Welcome to Mersana's Fourth Quarter and Full Year 2018 Conference Call. We issued a press release earlier this morning reviewing our first quarter and full year 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.

Before we begin, I'd like to mention that our call will contain 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 the 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 early encouraging preclinical results for XMT-1536 are not necessarily predictive of the results of our ongoing or future discovery programs or clinical studies, that the development and the identification of the company's product candidates and new platforms will take longer and/or cost more than planned, and that our clinical trials will not be completed on schedule, if at all. These risks are discussed in the company's SEC filings, including, without limitation, the company's annual report on 10 -- on Form 10-K filed with -- on March 28, 2018, the company's quarterly report on Form 10-Q filed with the SEC on November 13, 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.

And with that, I'll turn the call over to Anna Protopapas, Mersana's Chief Executive Officer.

Thank you, Sarah. Good morning, everyone, and welcome to our financial and corporate update call for the fourth quarter and year ended 2018. With me today are several members of our executive leadership team. I'm joined by Tim Lowinger, our Chief Scientific Officer; Dave Spellman, our Chief Financial Officer; Eva Jack, our Chief Business Officer; and the newest member of our executive team, Dirk Huebner, our Chief Medical Officer.

Dirk joined us in late November and brings with him 25 years of oncology drug development experience, including significant experience in the development and approval of ADCs. During Dirk's 7-year tenure at Takeda, Dirk led the European approval of ADCETRIS and the design and execution of label expansion studies for the drug. Dirk's expertise will be instrumental as we prepare for the next steps in the development of XMT-1536 and advance our future ADC candidates. We're very excited to have Dirk on the team.

I'll now turn to the business update. We started the year with a focused strategy and are in a strong position for growth in 2019 and beyond. Our confidence in our path forward is based on a number of factors. First, the early emerging profile for 1536, our wholly-owned, first-in-class Dolaflexin ADC targeting NaPi2b is very encouraging. The program is poised for important data readouts in the next 12 to 18 months with the first one being dose escalation data in the second quarter of this year.

Secondly, we continue to leverage our expertise in ADC development and our proprietary and highly differentiated platforms to expand our pipeline and address an even broader range of unmet medical needs. We remain on track to disclose our next ADC candidate in the second half of this year, targeting the first half 2020 for an IND.

Thirdly, we recently strengthened our balance sheet through a successful public equity offering that provided us with over $97 million in gross proceeds, which we expect will extend our cash way significantly and would support progression of our pipeline through important clinical milestones.

With a promising asset in the clinic, a next ADC targeted to move into the clinic in the first half of 2020, a strong balance sheet and an experienced and committed team, we believe we have the components for a successful year ahead of us.

Before I pass on the call to Dirk and Tim for specific data updates, I would like to highlight the important aspects of XMT-1536 that make it a particularly exciting opportunity. XMT-1536 is a first-in-class ADC to a clinically validated target. We have demonstrated preclinically that we have a highly differentiated molecule with the potential for enhanced efficacy and tolerability. Tim will cover the preclinical work that we believe supports our differentiation in a few moments.

The program continues to move rapidly, and we're encouraged by the emerging data as we're seeing clinically meaningful efficacy at well-tolerated doses. And again, Dirk will provide more details on the study.

Thirdly, the program addresses significant unmet patient needs, both platinum-resistant ovarian cancer patients as well as non-small cell lung cancer adenocarcinoma patients that progress or frontline therapy have poor prognoses and very limited treatment options.

Over the next few months, we will select a go-forward dose and initiate the expansion cohorts. Our objective is to optimize efficacy, tolerability and duration of treatment while understanding the correlation between NaPi2b expression and response.

With that as background, I'd like to turn the call over to Dirk Huebner, our Chief Medical Officer to discuss the early 1536 study in more detail.

Yes. Thank you, Anna. As we disclosed previously, we have explored a once every 3-week schedule in doses of up to 40 milligrams per square meter. We subsequently began evaluation of the once every 4-week regimen. We have completed the 20 and the 30 milligram per square meter dose in cohorts and recently initiated a 36 milligram per square meter does cohort. To date, XMT-1536 has been well tolerated at all doses. We will continue to dose escalate at a once every 4-week schedule with the objective of identifying the optimal dose for further clinical development.

To remind you, we began observing clinically relevant activity at doses at 20 milligrams per square meter and above. The dose escalation is recording heavily pretreated patients with a broad set of tumors known to express NaPi2b, including ovarian cancer and SCLC adenocarcinoma, and endometrial, papillary renal, salivary duct and papillary thyroid cancer. Patients are not selected for NaPi2b expression, although the expression levels will be measured retrospectively based on archival tissue. We are very encouraged by the early signs of efficacy and the tolerability profile we have seen to date. In selecting the go-forward dose, we will seek a dose that provides an optimal balance of efficacy, tolerability and duration of treatment.

Following the selection of the go-forward dose, we plan to initiate the expansion cohort portion of the study in ovarian cancer and NLCLC adenocarcinoma. We are in the process of finalizing the eligibility criteria and sample size for these expansion cohorts. Our objective for the expansion cohorts is to characterize the efficacy, the safety profile of XMT-1536 as well as to determine the response relationship to NaPi2b expression. These are critical elements that will prepare us well for potential patient selection strategies and subsequent pivotal studies.

I will turn it over now to my colleague, Tim Lowinger, who is our Chief Scientific Officer, to discuss the exciting discovery work that's ongoing.

Thanks, Dirk. Our excitement about XMT-1536 is not only based on the emerging clinical data, but also from a robust set of preclinical data that we've accumulated to date to demonstrate differentiation of this agent. In head-to-head preclinical studies, XMT-1536 demonstrated superior efficacy to lifastuzumab vedotin across multiple experiments. Comparison of the published nonhuman primate HNSTD for lifastuzumab vedotin, based on payload to the XMT-1536 data also supports improved tolerability. Furthermore, the high DAR of XMT-1536 provides a more efficient delivery of the payload, including in tumors with lower levels of antigen expressions.

In addition, we've demonstrated preclinically that the DolaLock payload, which is not a Pgp substrate, remains locked in the tumor for weeks after a single dose, providing highly durable responses.

Beyond XMT-1536, we are making significant progress on our discovery efforts and have some exciting disclosures in 2019. We're continuing to evaluate Dolasynthen in the context of our prioritized targets. If you recall, Dolasynthen utilizes our innovative DolaLock auristatin payload, now incorporated into a fully synthetic homogeneous scaffold that we have developed. Dolasynthen retains the favorable properties of Dolaflexin, including excellent physical chemical and PK properties, and also allows for further optimization of the therapeutics index for a given antibody through the precise control of optimal DAR matched for the specific target as well as site-specific bioconjugation to provide completely homogeneous ADCs. We will be presenting further preclinical data on our Dolasynthen platform at the upcoming AACR meeting on April 1 at 3:05 p.m. during the Novel Therapeutic Agents and Screening Approaches session.

We will also be presenting a poster at AACR on Sunday, March 31, focused on our work on a dual payload ADC, which contains both the microtubular inhibitor and a DNA alkylator. Dual Payload ADCs can enable the efficient delivery of 2 payloads with different mechanisms of action at a precisely defined stoichiometry directly to the tumor cell.

Lastly, we have also made great progress in advancing our next ADC clinical candidate. We plan to disclose the details of this next candidate in the second half of 2019, with the goal of submitting an IND and initiating a Phase I study in the first half of 2020. We're very excited about the potential of this candidate, so please stay tuned.

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

Thanks, Tim. And now recap of our fourth quarter and full year 2018 financial results.

Some of our key highlights for the fourth quarter include the following. Collaboration revenue for the fourth quarter 2018 was approximately $1.2 million compared to $3.3 million for the same period in 2017. The decrease was largely the result of a decrease in efforts to support partner programs.

Research and development expenses for the fourth quarter 2018 were approximately $19.8 million compared to $14.6 million for the same period of 2017. The increase was primarily due to an increase in clinical and regulatory expenses associated with the advancement of XMT-1536 and manufacturing costs to support the program's future clinical development.

General and administrative expenses for the fourth quarter 2018 were approximately $4.2 million compared to $3.1 million for the same period of 2017. The increase is driven by an increase in headcount and professional fees.

Net loss for the fourth quarter 2018 was $22.4 million or $0.97 a share compared to a net loss of $14 million or $0.61 a share for the same period in 2017.

Weighted average common shares outstanding for the years ended December 31, 2018, and December 31, 2017, were 23,184,459 and 22,750,425, respectively.

I would also like to provide a bit more color on what to expect with the termination of the XMT-1522 collaboration with Takeda. In Q1 2019, we expect to accelerate the deferred revenue portion of the Takeda contract and fully recognize all collaboration revenue. There are some trailing costs still to come in in Q1 as the result of winding down the 1522 program.

Additionally, with the stopping of all program-related activities, we expect our go-forward cost to run rate to decrease. We're well capitalized with a strong cash position. Our cash, cash equivalents and marketable securities as of December 31, 2018, were $70.1 million compared to $125.2 million as of December 31, 2017.

Additionally, as you're aware, we closed a public equity offering on March 5, which provided us with gross proceeds of approximately $98 million. With this additional capital, we expect to be able to fund our operating plan through several key clinical milestones with cash into at least mid-2021.

I will now return the call to Anna for some concluding remarks.

Thank you, Dave. I'll wrap today's call with a review of our key goals for 2019 and beyond. First, we look forward to an active year in the clinic as we move towards the dose escalation readout in our 1536 study, the selection of the go-forward dose and the initiation of the expansion cohort portion of the Phase I study. We also expect to announce our next clinical candidate in the second half of 2019. And target the filing of our next IND in the first half of 2020.

Finally, we will continue to disclose preclinical and discovery data at scientific meetings throughout the year as we drive forward our proprietary ADC technology platforms. We believe we're in a strong position to execute on these goals and remain confident that our novel technologies and clinical assets have the potential to provide a real benefit to cancer patients with extremely limited treatment options.

Thank you for your continued support of Mersana. We're now opening the call to Q&A.

(Operator Instructions) Our first question comes from Jonathan Chang from SVB Leerink.

First question. Can you help set investor expectations ahead of the 1536 dose escalation data in the second quarter, in terms of how much more data we could see versus the initial data disclosure earlier this year? And the type of data we could see?

So thank you, John. What you will see is the continued dose escalation study, we're looking at -- we've -- as we've mentioned, we've continued to dose escalate, completed the 30 milligram move to the 36 milligram, which is currently recruiting patients. And we will continue to dose escalated based on data. Obviously, data will drive us to where we go next. For these patients, we will have evaluation of the tolerability profile, we will look at the PK. We are looking at evaluation of the NaPi2b expression, but this would be based on archival tissue, which is only requested for the dose escalation study. And obviously, early signs of efficacy. So that's what the data package will look like when we disclose it in Q2.

Got it. And just a follow-up. I'm guessing the bulk of your data in the second quarter update will likely be in platinum-resistant ovarian cancer. What do you see as the benchmark there? And are there any lessons from the recent FORWARD I, another ADC in development for platinum-resistant ovarian cancer that could be applied to your own development efforts?

So as you know, these patients have very poor prognosis. The standard of care for these patients is pegylated doxorubicin. The response rate is around 10%, the progression free for survival is 3 to 3.5 months. And that has been further validated I think through the data we saw recently on another ADC. So what -- we also looked at the publicly available data on the other ADC. And obviously, it's always disappointing when a study for a drug that has a potential to help patients that really don't have many other options, when a study like that is appointed, it is always disappointing. When we looked at the top line data, whatever was disclosed, I think it reinforces our belief that understanding the correlation between expression of the antigen and response is really critical and it reinforces the work we will be doing in the expansion cohort to really understand that. So we can be well prepared for patient selection in the later stage, the later trials. The other thing I think that is important and it's reinforced by even the top line data that was disclosed is that the response rate doesn't always directly correlate with PFS, and what really matters is how long are patients on treatment? How long are they getting clinical benefit? Whether that is a response or even stable disease, both of the disease control and extended disease control is what is really going to drive an increased PFS and potentially an improved overall survival. So as we look at designing and expansion cohorts, we're looking at how can we better understand not only the correlation of expression with the target but also how do we select a dose where patients can stay on treatment for extended periods of time and benefit from the drug.

And our next question comes from Mike Ulz with Baird.

Just a follow-up on 1536 in terms of the dose escalation. You're currently at the 36-milligram dose, and is the goal there to eventually hit MTD, so you'd continue to go higher if you don't hit it at 36 milligrams? And then can you remind us how high you dosed with 1522?

So on 1522, we dosed to 37 milligrams per meter squared. Before we moved away from the program, we had not yet reached MTD. I think your question regarding 1536, I think the right answer is we're going to let the data take us where the data takes us. As we said, we're looking for good tolerability, good duration of response, balance with efficacy and as we've disclosed, we starting seeing clinically meaningful efficacy at 20 milligrams per meter squared.

And our next question comes from Jessica Fye with JPMorgan.

Once you identify the recommended Phase II dose for 1536, can you talk about whether the expansion cohorts would start simultaneously or in more of a staged manner? And to the extent they might be staggered, can you talk to which tumor type you would expect to start with first? And maybe also just talk about your expectation for potentially different enrollment rates depending on tumor type?

Yes, that's a good question, Jessica. And I'll start by saying that Dirk and his team is still in the middle of really finalizing what the expansion cohorts will be. We haven't given any formal guidance on the expansion cohorts. But I can tell you that our current thinking will be that we will simultaneously start 2 expansion cohorts, 1 in ovarian and 1 in non-small cell lung cancer. The recruitment at the existing sites we're in will be seamless because this will be a continuation of the existing protocol, but we will have to bring onboard additional sites, particularly in lung cancer because the sites we're at are primarily ovarian cancer sites. So we're in the midst of designing those expansion cohorts, doing the feasibility study, identifying the new sites, so I'm not in a position to give you exact guidance, but in the sites we're in, we're going to roll from the expansion cohort into -- from the dose escalation into the expansion cohort in a seamless way.

And our next question comes from David Nierengarten with Wedbush Securities.

Just -- actually, I have a science question. I was curious, as you look at the Dolasynthen platform and dual ADCs, are there limits to what chemotherapy pairs or nontoxin pairs I should say, you can use there. Just thinking about some of the challenges on dosing both of those -- or 2 different molecules together at the same antibody. I was just, again, scientifically curious if there are limits to the chemistry and limits to pairs that you're looking at. Just if you could elaborate on that?

Sure, David, this is Tim. No, you bring up a good point that as we look at dual payloads, one has to consider the properties of each payload and also how they combine, but we're excited about with the potential for dual payloads are the synergies that one can achieve. And again, if you think of the types of platforms that we have and our ability to range drug-antibody ratio up to very high levels. Things that we're think about are taking payloads that can have their own established therapeutic index but combining those in synergistic ratios such that every tumor is taking up those 2 drugs in a synergistic ratio, I mean really controlling the biodistribution of those. So it is an added complexity, but I think offers a lot of potential as we think about how do we further innovate in the ADC space.

So maybe a specific follow-up on -- is it possible -- or have you looked at combinations of other DNA damaging agents, like a PARP inhibitor or a derivative thereof with a DNA damaging agent like a platinum might not work, but something in that arena? I'm again just curious on the limits of the science on that.

Sure. And I think what it really gets to is, you're starting to outline all the possibilities that there are. And some of those mechanisms that when combined could be very interesting synergies. But this is work that's ongoing, and I don't want to say really much more than that, other than we do think that there's a lot of potential here and an area for innovation.

(Operator Instructions) Our next question comes from Debjit Chattopadhyay with H.C. Wainwright.

So the 2 PRs at the lower dose, have those been now confirmed? And from an optimal dose perspective from your preclinical studies, what is the max dose that you plan to get at to get the maximum target engagement? And how does that line up with the Roche program -- the discontinued Roche program.

Yes. As we pointed out already at the JPMorgan Conference, the 2 PRs have been confirmed. So that's so far -- how far we can disclose the data and more data on that topic, we're going to disclose when we publicly discuss that at a scientific meeting in the second quarter of this year.

So you also asked, Debjit, about how our dose compares, obviously, these are different programs, different design of our ADCs, but 36 milligrams per meter squared is about 1 milligram per kilogram. You know that the Genentech molecule had 2 -- was dosing at 2.4 milligrams per kilogram. If you take into consideration that we have about 3 to 4x the payload, so if you want at a high level to translate the 1 milligram per kilogram to a payload dose, the equivalent payload dose, we are currently above the payload dose that was dosed with the vcMMAE. Obviously, these are different ADCs, but at a high level, we are already above the payload dose that was delivered by the vcMMAE program.

Yes, that's what I was trying to get at. And then one last question. Obviously, I get the focus in non-small cell is going to be the IL relapse or maybe even refractory cohort. So could you guys point to any specific examples where targeting a nondriver mutation has a result in a clinically relevant outcome?

So with respect to the expansion cohorts, as you pointed out, we're going to grow into NSCLC adenocarcinoma as well as ovarian cancer. However, what the specifics are in terms of inclusion criteria, so this is work in progress as we discuss it with our investigators and experts in the field. We are working on a very reasonable patient population, where our compound can be positioned well for market utilization as we go forward.

And I am not showing any further questions at this time. I would now like to turn the call back over to Anna Protopapas, CEO, for any closing remarks.

Thank you all for tuning in to our full year update. We're making steady progress in the clinic and in our preclinical and development work. And we look forward to sharing our progress with you over the course of the year. Have a great day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all now disconnect. Everyone, have a wonderful day.