Mersana Therapeutics Inc (MRSN) 2019 Q1 法說會逐字稿

Good morning, and welcome to Mersana Therapeutics' First Quarter 2019 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 First Quarter 2019 Conference Call. We issued a press release earlier this morning reviewing our first quarter 2019 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'll 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 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 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'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 first quarter of 2019. Joining me today with prepared remarks are Dirk Huebner, our Chief Medical Officer; Tim Lowinger, our Chief Scientific Officer; and Dave Spellman, our Chief Financial Officer. We're also joined by Eva Jack, our Chief Business Officer; and Michael Kaufman, our Senior VP of CMC, who will be available for questions and answers.

I'll begin today with a high-level business update and then turn the call over to Dirk, Tim and Dave to provide more details. Since the beginning of the year, we have continued to make important progress in advancing our clinical candidate XMT-1536, furthering our earlier-stage pipeline and ensuring that we have the resources necessary to execute on our business goals.

XMT-1536, our lead asset, is a wholly owned Dolaflexin ADC targeting NaPi2b-expressing tumors such as ovarian and lung cancer adenocarcinoma. XMT-1536 is a first-in-class molecule with a clinically validated target and a clinical demonstration that we have a highly differentiated molecule with the potential for enhanced efficacy and tolerability.

Let me start with the status of the Phase I dose escalation. Remember in this portion of the study, we're evaluating ovarian, lung adenocarcinoma and certain rare tumors that are likely to express NaPi2b. These are heavily pretreated patients not preselected for NaPi2b expression that have exhausted all other options. The safety, efficacy and duration of treatment of XMT-1536 to date gives us and our investigators the confidence to move forward with the dose expansion phase of the trial. For this reason, as Dirk will explain, once we complete the evaluation of the current dose cohort, we plan to start the expansion portion of the study.

One of the expansion groups will evaluate XMT-1536 in platinum-resistant ovarian cancer. As you're aware, these patients have limited treatment options and poor outcomes. The approved therapies for platinum-resistant ovarian cancer result in a 10% to 15% response rate and a PFS of 3 to 3.5 months. The second expansion cohort will evaluate XMT-1536 in lung adenocarcinoma patients. Although PD-1 therapies have changed, the non-small cell lung cancer landscape in frontline therapy, there remain limited options for patients who do not respond or who progress. Again these options result in poor outcomes. We look forward to advancing XMT-1536 in these patients and evaluating its potential to provide improved patient outcomes.

We're also pleased to announce that our XMT-1536 dose escalation data abstract submitted to ASCO for the upcoming annual meeting has been accepted. Dirk will also provide more color on the ASCO poster in his update. Regarding our future programs, we continue to make significant progress in advancing our next ADC clinical candidate. We're on track to disclose this candidate in the fourth quarter of 2019 and are targeting the filing of an IND in the first half of 2020.

Lastly, in early March, we strengthened our balance sheet through a successful public equity offering that provided us with approximately $98 million in gross proceeds. And more recently, we completed a $20 million non-dilutive debt financing. These steps allow us to run the business and execute on our near- to mid-term goals to reach certain important value-enhancing milestones.

With that, I will now turn the call over to Dirk, our Chief Medical Officer to discuss XMT-1536 dose escalation and dose expansion in more detail.

Thank you, Anna. As Anna mentioned, we are excited to announce that our abstract titled, Phase I Dose Escalation Study of XMT-1536 a novel NaPi2b targeting Antibody-Drug Conjugate in patients with solid tumors, likely to express NaPi2b. We presented in the poster display in a poster discussion format at the upcoming ASCO Annual Meeting on June 1.

The presentation will include the evaluation of patients treated in the once every 3-week dosing schedule as well as the once every 4-week dosing schedule in patients up to and including 30 milligrams per square meter dose. The poster and the discussion will focus on the safety, tolerability, efficacy and duration of treatment with 1536 and will include incremental data beyond the submitted abstract.

The abstract will be released by ASCO on May 15, 2019, and the information on the logistics and our poster and poster discussion will be announced closer to the ASCO meeting date. The encouraging safety and tolerability data as well as the early signs of efficacy we have seen and we'll be reviewing at ASCO provides us with a confidence we need to move XMT-1536 forward into the expansion portion of the study immediately upon completion of the current dose escalation cohort of 36 milligram per square meter.

We're in the process of site selection and initiation to evaluate XMT-1536 as a single agent in 2 distinct patient populations. In the first group, we aim to enroll platinum-resistant ovarian cancer patients who have had no more than 3 lines of therapy. In the second group, we aim to enroll NSCLC adenocarcinoma patients who have had treatment of an anti-PD-1 or anti- PDL-1 monoclonal antibody and platinum-based therapy, whether taken in combination or sequentially. We will also be enrolling patients with EGFR or ALK mutations, who have had prior lines of targeted therapies and no more than 1 line of chemotherapy.

As Anna mentioned, all of these patient groups have limited treatment options and poor prognosis.

Our objectives for the expansion phase of the study to characterize efficacy and safety and the safety profile of XMT-1536 to evaluate duration of response and to determine the relationship to NaPi2b expression. In both expansion populations, patients will not be preselected, but patient eligibility criteria will require archived tumor samples and fresh tumor biopsy when medically feasible to further evaluate the correlation between NaPi2b expression and efficacy.

We're designing the expansion cohorts to be robust enough in size to give us a clear understanding of the profile of the drug and the data necessary to decide on the registration strategy. Our current plan is to enroll around 40 to 45 patients in each indication, although this could change as we accumulate more data.

We expect the ovarian cancer patient cohort to enroll more quickly than the NSCLC adenocarcinoma patients. There remains a significant unmet medical need of patients suffering from platinum-resistant ovarian cancer and NSCLC adenocarcinoma. They're very encouraged by the emerging profile of XMT-1536 and look forward to initiating the dose expansion phase of the study being able to pursue a potentially exciting therapeutic option for these patients.

I will now turn the call over to Tim Lowinger, our Chief Scientific Officer, to discuss our preclinical and next-generation ADC platform work.

Thanks, Dirk. We've continued to make significant progress on our candidate nomination and our discovery efforts. I'll start with our work on expanding our pipeline of innovative ADC candidates. We've continued to advance our next ADC clinical candidates and have generated compelling preclinical data for a number of ADCs utilizing both our Dolaflexin and Dolasynthen platforms. We remain on track to disclose the details of our next candidate in the fourth quarter of 2019, and we've initiated preclinical development efforts consistent with our plan to file an IND and initiate a Phase I study in the first half of 2020.

We've also continued our work to validate Dolasynthen, a novel, fully synthetic, structurally homogeneous drug conjugation platform, which allows a tunable drug-to-antibody ratio from 2 to 24. Dolasynthen utilizes our innovative DolaLock auristatin payload and retains the favorable properties of Dolaflexin, including excellent physicochemical and PK properties and also allows for further optimization of the therapeutic index for a given antibody through the precise control of optimal DAR match for the specific target as well as site-specific bioconjugation to provide completely homogeneous ADCs.

We recently presented exciting preclinical data from our Dolasynthen platform at AACR, where we showed that the flexibility and precision offered by the Dolasynthen platform allowed us to quickly and efficiently create a number of ADCs with variations in DAR, bioconjugation site and bioconjugation method. Subsequent evaluation of these ADCs in head-to-head studies to evaluate efficacy, tolerability and drug like properties allowed us to quickly identify the optimal candidate among the ADCs tested. We believe these data demonstrate the significant potential for clinical application and the ability of our Dolasynthen platform to identify the optimal ADC for a given target in antibody as opposed to a one-size-fits-all approach. We are excited for the potential of this platform and look forward to providing more details on its applications throughout the year.

We also presented a poster at AACR that focused on our work on a prototype dual-payload ADC, which contains both the microtubular inhibitor and a DNA alkylator. Cancer is the disease commonly treated with combinations and a dual-payload ADC can enable the efficient delivery of 2 payloads with different mechanisms of action at a precisely defined stoichiometry directly to the targeted tumor cell.

Our AACR posters showed how we used our modular Synthemer platform to engineer a dual-payload ADC employing 2 mechanistically distinct payloads with a combined DAR of approximately 20. In-vitro characterization of this ADC demonstrated potent toxicity and equally importantly the characteristic phenotypes of both expected mechanisms of action were observed in target cells. We believe this demonstrates the flexibly of our modular Synthemer approach and its potential to enable our continued efforts to innovate in the ADC field. All the data I described is available on the publications page of our website.

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

Thank you, Tim. I'll start today with our cash position. Through 2019, we have taken important steps to ensure that we are well capitalized. In the first quarter, we completed a successful public equity offering that provided us with gross proceeds of approximately $98 million, allowing us to close the quarter with $137.3 compared to $70.1 million as of December 31, 2018. We expect our current cash position will fund our operating plans through several key clinical milestones with cash into at least mid-2021.

Additionally, we have entered into a non-dilutive debt financing with Silicon Valley Bank for up to $20 million, further strengthening our available cash. The first tranche of $5 million was funded upon execution of the agreement that we have, at our option, the ability to draw on this facility through August 31, 2020.

We believe these financing activities provide us with the flexibility to continue to invest appropriately in advancing XMT-1536 and our earlier stage ADC programs through important value-enhancing milestones.

And now some of our key highlights of our first quarter 2019 financial results. Collaboration revenue for the first quarter 2019 was approximately $41 million compared to $3.1 million in the same period of 2018. The increase in collaboration revenue was primarily due to the recognition of $40 million in deferred revenue due to the discontinuation of the XMT-1522 program and the Takeda collaboration as announced in January of 2019.

Research and development expenses for the first quarter 2019 were approximately $15.1 million compared to $12.3 million for the same period in 2018 driven primarily by an increase in external costs for the manufacturing of XMT-1536 and our next clinical candidate as well as an increase in headcount and facilities costs.

First quarter 2019 R&D expenses also included a one-time manufacturing run for our partner, Merck, for which we were fully reimbursed. The increase was offset by a decrease in external clinical and regulatory program expenses due to the discontinuation of XMT-1522.

General and administrative expenses for the first quarter 2019 were approximately $4.4 million compared to $3.6 million for the same period in 2018. The increase is driven by an increase in headcount and professional fees. Net income for the first quarter 2019 was $21.9 million, or $0.72 a share, compared to a net loss of $12.4 million, or $0.54 a share, for the same period in 2018. Net income in the first quarter was driven by the recognition of the remaining $40 million in deferred collaboration revenue as previously discussed.

Weighted average common shares outstanding for the years ended March 31, 2019 and March 31, 2018, were approximately $30.3 million and $22.8 million, respectively.

We will now open the call to Q&A.

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

First question, any color on how the 36 mg every 4-week dosing cohort is shaping up? Sounds like you haven't reached an MTD yet. Also just to confirm data from that cohort won't be at ASCO? And should we expect the planned dose expansion cohorts to be at the 36 mg dose level?

So Jonathan, thanks for the question. The profile we're seeing to date seems promising. We like what we're seeing from a tolerability, from a safety and an efficacy standpoint. We have not fully evaluated the 36, so the abstract will have all the data through the end of the full evaluation of 30, but not the 36. Our thinking is that we're comfortable with what we're seeing whether it's 30 or 36. And based on the complete evaluation of 36, we'll kick one of those 2 doses to go forward with the expansion cohort.

Got it. Second question on the dose expansion cohorts, one in ovarian and one in lung. I'm curious to know how much experience do you have in the dose escalation portion in lung cancer patients at this point?

That is a great question. Most of our experience is in ovarian, as we've said before. We will be accumulating hopefully in the near-term more experience in lung. And as we've said, we expect the ovarian to move much faster than the lung, mostly because we are a site that primarily recruit ovarian, and we'll have to get -- we are getting additional sites up and running in order to increase our experience in lungs.

Got it. And just one last question for me. On the additional site initiations, any color on how many more sites you're targeting for the expansion portion?

We're not quite in a position to give you more color. We will, as we get the sites up and running and have a really firm plan. But it will -- so...

Next question comes from the line of Jessica Fye of JPMorgan.

To the extent the 36 milligram dose ends up being a go-forward dose, but we won't see those patients at ASCO, when could we see the results for that cohort?

Good question. Once we complete the full evaluation, we're going to look for the right forum to share the data. It could be at a medical meeting. It could be in another forum.

Okay. And then when you talk about the ovarian expansion cohort involving platinum-resistant patients who have failed standard therapy, does that include Avastin and single agent chemos and/or PARPs? I guess can you just help us think more specifically about the enrollment criteria there? And remind us if the dose escalation patients have had prior PARPs or prior Avastin?

Yes. This is Dirk. Happy to address that question, although we got a fire alarm here right now, but...

We may have to cut it short, but try.

But to answer your question, so we're going to enroll patients up to 3 lines of prior therapy. So usually these patients got treatment with platinum-based and Taxol-based chemotherapy. We're not making any exclusions whether they have the trastuzumab or other treatments. The only requirement that we implement into the protocol is that they have to have up to 3 prior lines of therapy. They can't get more than that, so just those up to 3 prior lines of chemotherapy. And the PARPs, also we don't account for the PARPs as long as they are given in maintenance, we're fine. So that wouldn't account as an additional line of therapy.

Maybe to add to what Dirk said, in the dose escalation, if I recall, we've had some patients who have seen PARPs, but not all of them.

That is correct.

Yes.

Okay. And when you say up to 3 prior lines of therapy, does that include in the platinum setting? Or is that outside of the platinum-resistance...

I'm sorry. Apologies. We are having a fire drill in the building, so we do need to leave. Sorry to do this to you all and we will follow up with each of you as soon as we figure out what's going on in the building.

I'm sorry. We apologize.

Thank you. Bye.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.