Mersana Therapeutics Inc (MRSN) 2019 Q4 法說會逐字稿

Good morning and welcome to Mersana Therapeutics' Fourth Quarter and Year-End 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 Fourth Quarter and Year-End 2019 Conference Call. We issued a press release earlier this morning reviewing our fourth quarter 2019 and full year results and business updates, which will be covered on this call. A replay of today's call will be available on the Investors and 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 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 risks that our early encouraging preclinical results for XMT-1536 are not necessarily predictive as 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 February 28, 2020, 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 of 2019. Joining me today with prepared remarks is Brian DeSchuytner, our Senior VP of Finance and Product Strategy. The rest of the management team will be available for your questions. Our accomplishments in 2019 have laid the foundation for a data- and milestone-rich-driven 2020. We made a great deal of headway in advancing 1536 and 1592 and utilizing our innovative ADC platforms to advance our early-stage pipeline with plans for 2 first-in-class development candidates in 2020, including B7-H4 DolaLock ADC and a STING agonist ADC based on our immunosynthen platform for a nascent yet undisclosed target. I will provide an overview of the status of our clinical and early-stage programs and outline our goals and milestones for the remainder of the year, and then Brian will provide our financial results for the fourth quarter and full year 2019. We're going to keep our prepared remarks brief because we just provided a comprehensive corporate update last month in San Francisco.

I'll start with 1536, our first-in-class and wholly owned Dolaflexin ADC targeting that Napi2b. As we at ASCO in 2019, XMT-1536 has shown confirmed responses and prolonged stable disease at well-tolerated doses in very heavily pretreated and biomarker on selected patients. Since then, we have made significant progress in demonstrating the safety and activity at higher doses and initiated expansion cohorts, putting us on track to establish proof-of-concept in 2020.

More specifically, we have cleared the 36 and 43 milligrams per meter square dose level with primarily grade 1 and grade 2 adverse events and without the severe neutropenia, neuropathy and ocular toxicity seen with other ADC platforms. We have not yet determined a maximum tolerated dose and are currently evaluating the 52-milligram per meter square dose.

Importantly, we recently learned that our late-breaker abstract was accepted for an oral presentation of our updated Phase I dose escalation data at the upcoming Society of Gynecologic Oncology, or SGO, Annual Meeting on Women's Cancer in Toronto on March 30. The SGO oral presentation will provide an update on the ongoing dose-escalation study, including longer follow-up of patients presented at ASCO 2019, a new patient data from the 30-, 36- and 43-milligram per meter square dose cohorts. This first disclosure will characterize the tolerability profile of XMT-1536 and demonstrate encouraging early signs of activity in very heavily pretreated and biomarker on selected patients.

The dose-escalation data to be presented will include a total of 59 patients. 37 of these patients are ovarian cancer patients and 11 are non-small cell lung cancer patients. There are also 11 patients with other tumors previously disclosed at ASCO that were treated at lower doses and generally had low levels of Napi2b expression. The patients in the dose-escalation study are very heavily pretreated and have very poor prognosis, often having progressed not just on the available therapies but also on investigational therapies. Multiple published studies demonstrate the poor prognosis of these patients and their rapidly deteriorating likelihood of response with increasing lines of therapy.

By third or fourth line of therapy, the response rate approaches zero. Furthermore, these patients have not been selected for expression of the antigen. The primary focus of the dose-escalation study is to assess safety and tolerability, and we will be able to provide information on both short-term safety data in terms of dose-limited toxicities as well as longer-term follow-up. As we have communicated before, we're still evaluating 52 milligrams per meter square, and the data will not be complete enough in time to be disclosed in the SGO presentation.

We continue to see activity and plan to show further confirmed responses in prolonged stable disease. As you will appreciate, activities impacted by dose, line of therapy and degree of Napi2b expression as measured by H-score. While we will be able to share preliminary data showing dose, H-score and activity, the number of patients in each subgroup is limited, and it will be premature to establish a cutoff for patient selection.

We are excited to be presenting this data at SGO, the first of 3 XMT-1536 data disclosures we're planning in 2020. The oral presentation will be held on March 30 in the late-breaking session that is scheduled from 2:30 to 3:30 Eastern Time. We're planning to host a live conference call and webcast after the market closes that same day. We will provide further information with the dial-in and the webcast details as we get closer to the date.

Now moving on to the expansion cohorts. We are on track in our recruitment and the protocol amendment to move the dose to 43 milligrams per meter square is rapidly being adopted. Although the patients in the expansion cohorts are still late stage, they are more homogeneous than those in the dose-escalation studies. Our objective for the expansion cohort is to establish proof-of-concept, including response rate, duration and a Napi2b expression cutoff in the patient population where we will seek to run a pivotal study.

In ovarian cancer, the standard of care in this setting is single-agent chemotherapy, and multiple contemporary studies have defined the performance of the standard of care as 4% to 12% response rate and 3 to 4 months PFS. Within ovarian cancer, we believe we have a faster market path using a single-arm registration study we can show a response rate above the historical standard of care.

In non-small cell lung cancer, the standard of care following progression on checkpoint inhibitors and platinum-based chemotherapy or failure of targeted therapy for patients with tumors harboring oncogenic driver mutations is docetaxel alone or in combination with targeted agents. This standard of care has an overall response rate of 14% to 23%, median progression-free survival of 3 to 4 months. There are fewer precedents for faster market paths in non-small cell lung cancer, but we continue to evaluate options. A correlation of Napi2b expression with EGFR and KRAS mutations as we reported at the triple meeting in 2019 raises intriguing possibilities for further patient selection in this high unmet medical need population. The collection of both the archival and fresh tissue in the expansion phase will allow us to better define the patient selection strategy overall.

Our next disclosure after SGO will be interim dose-expansion data in the second quarter. This second disclosure will provide an early look at the data from the expansion cohorts, including more information on safety and efficacy as well as on the potential patient selection strategy. In the second half of the year, we plan to provide more mature data from the expansion cohorts. We're very pleased with the progress made to date in advancing XMT-1536 towards proof-of-concept and look forward to presenting this progress at SGO and throughout the year.

I will now turn to our second clinical candidate, XMT-1592, which we disclosed in January. XMT-1592 was developed using our new platform, Dolasynthen. Dolasynthen retains our proprietary auristatin DolaLock payload with controlled by standard effect but is designed to have the added benefits of site-specific conjugation, precise drug-to-antibody ratio and even greater hydrophilicity for further enhanced drug like properties and tumor exposure.

We have chosen Napi2b as our first target for XMT-1592 based on the following. First, preclinically, XMT-1592 has shown a differentiated profile, particularly non-small cell lung cancer, where we saw a fourfold increase in efficacy over 1536 in models of lung cancer, consistent with higher tumor penetration. If validated clinically, this can provide us an important second shot on goal in lung cancer, a very large indication with significant unmet medical need.

Second, we can achieve clinical validation of XMT-1592 and the Dolasynthen platform efficiently given our leadership in Napi2b, our understanding of the patient population, our relationships with investigators and the commonalities between the 2 molecules. Both the antibody and the DolaLock payload are being manufactured at commercial scale. This validation will also help us to decide which platform is ideal for a given target when selecting future pipeline candidates.

Lastly, we believe Napi2b is an ideal target for our ADC platforms, and we're in a first-in-class position with 1536, where we are already seeing encouraging safety, tolerability and activity. With 1592, we have the potential to further extend our leadership position.

We are on track to initiate Phase I dose-escalation study of XMT-1592 in the first half of 2020. Additionally, we plan to present further XMT-1592 preclinical data at the upcoming AACR annual meeting in April. Stay tuned for more specifics on this disclosure as we get closer to the meeting.

We are continuing to advance our first-in-class B7-H4 ADC. As we have described, this is a great ADC target, well suited for the unique characteristics of our DolaLock payload and platforms and a good fit for our strategy of focusing on potential fast-to-market opportunities. We have compelling preclinical efficacy and non-human primate tolerability data with both Dolaflexin and Dolasynthen ADCs targeting B7-H4, and we expect to disclose our development candidate and the supporting data in the second half of this year.

Finally, we're continuing to advance our Immunosynthen discovery pipeline. We have a robust set of efficacy and tolerability data across multiple targets. The potential of activating the innate immune system to fight cancer in a safe and targeted manner is a potential game changer. We are on track to finalize the Immunosynthen platform design and target prioritization and select our first STING agonist ADC development candidate in the second half of 2020. We're excited about the potential of this platform and are planning to disclose further preclinical data from this work at an upcoming AACR annual meeting in April.

In closing, we have a busy but exciting year ahead of us with multiple opportunities to build value. We have a lead asset nearing proof-of-concept, a growing first-in-class pipeline of ADC candidates designed to address significant unmet medical needs for cancer patients, and innovative and differentiated platforms that would allow us to efficiently generate a robust pipeline of ADCs for multiple targets. And as Brian has outlined, we have the financial resources to execute on this plan. We are excited for the year ahead and look forward to updating you as we progress on each of these fronts.

And with that, I will turn the call over to Brian DeSchuytner, Mersana's Senior Vice President, Finance and Product Strategy, for an overview of our financial results.

Thank you, Anna. Good morning, everyone, and thank you for joining us today. Today, I'll review some of the key financial highlights from our fourth quarter 2019 results. I'll start with our cash position. We ended the fourth quarter of 2019 with approximately $100 million in cash, cash equivalents and marketable securities. We used net cash of $12.6 million in operations in the fourth quarter of 2019. The company expects that its cash, cash equivalents and marketable securities will enable it to fund its operating plan through important milestones, including the XMT-1536 Phase I clinical study and the planned dose-escalation study for XMT-1592. In addition, we have the option to draw additional funds of up to $15 million through the existing debt financing agreement with Silicon Valley Bank.

And now some of the key highlights from our fourth quarter 2019 financial results. Collaboration revenue in the fourth quarter of 2019 was immaterial when compared to the $1.2 million for the same period in 2018. The decrease in collaboration revenue was primarily a result of a decrease in services performed in support of partners' programs.

Research and development expenses for the fourth quarter of 2019 were approximately $12.4 million compared to $19.8 million for the same period in 2018. This was driven primarily by a decrease in manufacturing costs due to the timing of manufacturing runs and offset by an increase in preclinical efforts associated with XMT-1592 and the advancement of companion diagnostics development efforts for the Napi2b biomarker.

General and administrative expenses for the fourth quarter of 2019 remained flat at $4.2 million compared to the same period in 2018. Net loss for the fourth quarter of 2019 was $16.2 million or $0.34 per share compared to a net loss of $22.4 million or $0.97 per share for the same period in 2018.

Weighted average common shares outstanding for the quarters ended December 31, 2019, and December 31, 2018, were approximately 48 million and 23 million, respectively. We ended the year with 45 million shares outstanding following execution of the warrant exchange agreement with BVF. Approximately, 2.6 exchange warrant shares are considered outstanding for the net loss per share calculation as they are exercisable at any time into common shares.

I will now turn the call back to Anna.

Operator, we can now open up the line for Q&A.

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

First question. For the upcoming SGO presentation, how should we be thinking about how much Napi2b biomarker data will be available?

Thank you, Jonathan, and good morning. We are -- in the dose-escalation study, we are collecting archival tissue. It's not a requirement, but we are requesting archival tissue. We have most of the patients but not all of the patients. There are some gaps in the data set either because we have not been able to identify a sample or because the sample provided for -- to us is not of the quality where the H-score can be read. However, the majority of the patients we do have an H-score.

Got it. And second question, any color on how the 52-mg dose-escalation cohort is going?

It's too early to tell, Jonathan, and it will not be included in the SGO presentation. But once we have all the data and have made an assessment on the dose escalation, we will seek to find the appropriate forum to share that information.

Got it. And just one last one. How should we be thinking about how much and how much for the dose expansion data in the second quarter will be?

Yes, we are quite encouraged with the pace of recruitment of patients and -- but we have not given guidance on how many patients and for how long they've been on the trial. We will seek to give more specific guidance once we have confirmed the forum for the presentation and once we are closer to the time of the presentation.

Our next question comes from Boris Peaker with Cowen.

Maybe start with the lung cancer. So for the 11 lung cancer patients we presented at SGO, do you have a sense of how their Napi2b expression maybe compares to the ovarian cancer, if we just try to compare across different tumor types?

Yes. Well, before -- first of all, I'll point you to the triple meeting presentation we had where we did an extensive analysis of the expression of Napi2b in lung cancer patients. They do have -- the lung cancer patients that have adenocarcinoma do have a broad expression level, and 11 patients we have fall within that broad expression range.

Got you. And just my last question is, I'm just curious, how do you anticipate the response and the durability of response from the expansion cohorts to compare to those that we'll be seeing from the most ranging cohorts in both ovarian and lung cancer? I'm just curious if there's any reason to anticipate them to be better based on patient enrollment or any other characteristics.

So the question is how's the population in the dose expansion different than the population in the dose escalation. Boris, is that the question?

Yes, and how that will translate to response.

Yes. Maybe I'll ask Brian to answer that question.

Yes. I think it's an important question because the patients in that dose-escalation component of the study are very heavily pretreated and have very poor prognosis. So they've not only progressed on the available therapies but on investigational therapies. They have a sort of median of 5 prior lines as we reported at ASCO, and multiple published studies demonstrate the poor prognosis of these patients. And they're -- and frankly, they're rapidly deteriorating likelihood of response with increasing lines of therapy. By fourth and fifth line, the response rate is near zero.

So to answer your question about the dose expansion, that's still a late-stage patient population with a high unmet need, but they're more homogeneous in terms of line of therapy. That -- we're recruiting a population of 1 to 3 prior platinum resistant. We'll also take 4 prior therapies regardless of platinum status. I think you're aware and can appreciate the standard of care in that population is pretty well established. It's Doxil and topotecan and other single-agent chemotherapies. The response rate of those therapies in that setting is somewhere between 4% and 12%, with a median 3- to 4-month PFS. We will look for improvements here. It's quite difficult to extrapolate though from a median 5-line prior line patient population to a 1 to 3 prior line population. You're asking to extrapolate 2 to 4 lines earlier. So we are going to generate the data to demonstrate that over the course of 2020.

Our next question comes from Debjit Chattopadhyay with H.C. Wainwright.

So couple of clarifications. How much of the new data was included at the time of the SGO abstract submission versus what was presented at ASCO? And have the data cut off for the SGO presentation already happened?

Yes. Thank you for that question. There were 37 patients included, and this included at the time of ASCO, and that was not just ovarian and lung. If you remember, we had some other patients in the lower doses. So we're now close to 60, which are the new patients on 30, 36 and 43. The cutoff for SGO has already happened. We -- in fact, we already had to submit the presentation, which is why we are not in a position to include any data on 52 milligrams per meter square.

And any plans to dose escalate beyond 52, even if it is safe, although activity remains to be defined, given what you have available so far?

Yes, it's a good question, and I think the answer is the data will tell us where we should go. The protocol allows us to continue to escalate until we hit with the criteria for -- with 2 DLTs. So we'll just let the data tell us. We -- as you recall, we saw a first response at 20, we saw additional responses at 30. So we feel the expansion cohort is in a range that is efficacious, but we will continue to explore the profile of the drug as we push the dose up.

And one last question, if I may. In terms of your second-generation product, the Napi2b-targeted product, are you developing that primarily for non-small cell or is that going to be both for ovarian and non-small cell?

Good question. Well, our strategy here is to ensure we strengthen our leadership in Napi2b. We think it's a great target. We think our platforms are very well suited for the target. Our plan with 1536 is to continue to move as fast as we can towards that single-arm registration trial in ovarian.

The lung cancer landscape, as we described on the call, I think, is a little more -- it's a little more complicated to think through what a single-arm registrations trial would be, which gives us the opportunity during to bring forward 1592, dose escalate quickly because we already know the patients, the sites, we have the diagnostic and then decide which of those 2 is the best to take forward in non-small cell lung cancer. And our hope would be then we would find that subpopulation that allows us to do a single-arm registration trial, whether that's with 1536 or 1592, the data will tell us whether that is an option, but that would be a preferred option going forward.

So just to clarify, the 92-program dose escalation will enroll both ovarian and non-small cell and endometrial and stuff, right? So it's not specifically directed at any 1 cancer type in the escalation phase?

We have not disclosed what the escalation phase will be. We will have an opportunity to do that once we are -- start dosing patients. But we are on track to dose patients in the first half of this year.

Our next question comes from Jessica Fye with JPMorgan.

I was just following up on Debjit's question. Based on the SGO cutoff, how should we think about the duration of follow-up at the higher 36- and 43-milligram doses we're going to see at SGL? And how many ovarian patients should we expect at each of those dose levels?

So obviously, this is a dose escalation. We started 30 -- as you know, we started the 43 back in the fall. So I think this is a study that's really going to answer the question around safety, tolerability and early signs of efficacy. I think our expansion cohorts, particularly our disclosure in the second half of the year is really intended to answer the durability question in a more robust way. You will see durability data in this presentation, but the real sort of more definitive answer on durability will come with mature expansion cohort data. So I hope that answers your first question.

The second question is how many ovarian cancer patients there are in the 36 and 43, and I'm going to ask my colleagues for some help. I think the majority, there are about 15 or 16 patients in those 2 altogether and the majority is ovarian, but I don't have the exact numbers in front of me at this point.

Okay. Great. Should we expect some data from patients at the 43-milligram dose at the time of the interim expansion update in 2Q?

We have -- we are rapidly switched most sites over to 43. There are still a few that are taking longer to adopt the amendment, but there will be some 43 patients in our second quarter disclosure. The majority will be 36, but we will have some 43 patients.

Okay. And if I could just ask one more, just sort of bigger picture development question, I guess, thinking about how you're going to establish potential threshold for Napi2b expression that you can enrich for in future studies. I guess, how many -- assuming that's an efficacy call, how many sort of non-salvage line ovarian patients with evaluable H-scores do you expect to need to establish that cutoff?

Yes. Well, we've designed the expansion cohort in a manner that we believe is sufficiently large to give us that answer. And if you recall, we did say back and forth that we will have at least 45 patients, in each of the cohorts, of course, well, 45 for ovarian and 45 for lung. We might -- as we learn more about the H-score, we might choose to enrich along the way through a simple amendment, but our preliminary estimate was that 45 should give us sufficient data to determine what the right cutoff is.

(Operator Instructions) Our next question comes from Mike Ulz with Baird.

Just for XMT-1536, you mentioned a potential fast-to-market strategy, I think, in ovarian. So maybe you can give a little bit more detail on how you're thinking about the potential design there and would that be in a selected population? And then secondly, I know this may be challenging to answer, but could you potentially be in that study by the end of the year?

Yes. So our objective through -- in executing the expansion cohort is to generate a robust set of data that would allow us to go to the FDA at the end of this year, beginning of next year and really have a meaningful discussion about the path to approval. Precedent, and also feedback we received from the investigators we are working with and these are investigators that have worked closely with the FDA, is that there is a path -- because of the high unmet medical need, there is a path to approval with a single-arm registration in patients that have been treated with platinum, with Avastin and if BRCA positive with PARP inhibitors.

And as Brian mentioned earlier, the standard of care in these patients is a Doxil, topotecan and really has a response rate that at best is 12% and a PFS of 3 to 4 months. So -- and in fact, if you think about the changes in ovarian cancer over the last few months, Avastin and other targeted therapies have moved upfront, and therefore, the medical need in this later-stage population is even more acute. So that's how we're thinking about the next step, and we're working towards generating the data from the expansion cohort that would give us and regulators the confidence to initiate that single-arm registration trial.

Our next question comes from David Nierengarten with Wedbush Securities.

I only have one on 1592. I was just curious if you have an idea of how many kind of subefficacious dose cohorts you would be doing, given the information from 1536 or 1522. Just -- you've mentioned in the past that you could start maybe at a little bit higher dose. I was just curious if you had an idea of if you'd be starting likely in an efficacious dose or one dose below that? That's just my question.

Yes. So we do know a lot about the target. We do know a lot about the patient population. Obviously, we have the same antibody and the same payload. So that really gives us an opportunity to dose escalate quickly. And those are discussions that are part of our IND filing. And when we have -- when we are ready to start dosing patients, we'll be in a position to share more of our thinking, David, but we're definitely looking at those and how we leverage what we know about this target, this patient population and our molecule to be able to accelerate the dose escalation in the subtherapeutic doses.

And our next question is a follow-up from Debjit Chattopadhyay with H.C. Wainwright.

So I just wanted to follow-up on the H-score and the dose escalation segment. So if you come up with a cutoff of, let's say, 100, is there -- I'm just wondering in terms of thought process, kind of, would you dose escalate beyond 52 for the patients with an H-score cutoff below 100 to see if you can enhance activity in that setting?

Dose escalate for the patients below 100 -- look, I think all of those are ideas we are considering. We just have to let the data takes us where the data takes us. We don't -- it's premature to speculate at this point. To your point, we are doing the expansion cohort without selection because we really want to understand in a robust way what the cutoff is. So it is an important question we have to answer this year through the expansion cohorts.

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

I want to thank everyone for calling into our call. We look forward. We have a lot in front of us, a number of milestones and a really data-rich year, and we look forward to updating you along the way. Thanks for your support.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.