Mersana Therapeutics Inc (MRSN) 2020 Q2 法說會逐字稿

Good morning, welcome to Mersana Therapeutics' Second Quarter 2020 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 Second Quarter 2020 Conference Call. We issued a press release earlier this morning reviewing our second quarter 2020 financial 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 and XMT-1592, are not necessarily predictive of the results of our ongoing or future discovery programs or clinical study, as 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 SEC's -- in the company's SEC filings, including, without limitation, the company's annual report on Form 10-K filed on February 28, 2020, the company's quarterly report on Form 10-Q for the quarterly period ended March 31, 2020, and subsequent filings.

In addition, while we expect that COVID-19 pandemic might adversely affect the company's preclinical and clinical development efforts, business operations and financial results, the extent of the impact on the company's operations and the value of and market for the company's stock will depend on future developments that are highly uncertain and cannot be predicted with confidence of this time, such as the ultimate duration of the pandemic, travel restrictions, quarantine, physical distancing and business closure requirements in the U.S. and in other countries and the effectiveness of actions taken globally to contain and treat the disease.

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 President and Chief Executive Officer.

Thank you, Sarah. Good morning, everyone, and welcome to our corporate and financial update call for the second quarter of 2020. Joining me today with prepared remarks is Brian DeSchuytner, our Senior VP of Finance and Product Strategy. The rest of the executive team will be available for your questions.

It has been a transformative first half of the year for Mersana. Despite the challenges of operating in the COVID-19 environment, our team delivered exciting data on XMT-1536, [advanced] pipeline candidates, including moving XMT-1592 into clinical development and executed important financings which have well positioned Mersana. I'm very proud of the entire Mersana team. Because of their commitment and perseverance, we have reached multiple important clinical milestones and made significant progress against our 2020 pipeline goals as we work towards achieving our vision of significantly advancing the ADC field for the benefit of patients.

Let me summarize those milestones. First, for XMT-1536, we established the maximum tolerated dose of 43 milligrams per meter squared and demonstrated that at this dose, the agent is both active and well tolerated in both ovarian and lung adenocarcinoma patients without the severe neutropenia, neuropathy and ocular toxicity observed with other ADC platforms. We presented the dose escalation data at the webcast on March 31, in lieu of our oral presentation at the Society of Gynecological Oncology conference, which was canceled due to COVID-19.

Second, we demonstrated proof-of-concept for XMT-1536 in heavily pretreated ovarian cancer patients with a response rate of 35% including a 10% complete response rate. As a reminder, in platinum-resisted ovarian cancer patients, the standard of care is single-agent chemotherapy with a response rate of 4% to 12%. These data were presented at ASCO and in an associated webcast with a key investigator on May 27.

Third, we have demonstrated proof of activity with XMT-1536 in lung adenocarcinoma with 1 PR and multiple prolonged stable disease in heavily pretreated patients in the dose escalation in those expansion study.

For XMT-1592, we filed and cleared the IND and initiated patient dosing with the objective of rapidly dose escalating to reach the maximum tolerated dose and to clinically evaluate the differentiation from XMT-1536. The preclinical data supported the potential of XMT-1592 was presented at a virtual AACR conference on June 22.

We have continued to advance our immunosynthen platform. We presented preclinical data at the virtual AACR conference on June 22. These data continue to demonstrate that across multiple targets and preclinical models with immunosynthen STING agonist deliver a robust target-dependent antitumor effect as well -- at well tolerated doses and into tumor-specific immune memory and other hallmarks of immune activation.

These data also shows that the immunosynthen STING agonist has over 100-fold increased potency as well as significantly lower reduction of systemic cytokine when compared with intravenously administered unconjugated free agonist, supporting the potential for significantly improved therapeutic index.

We have also advanced our first-in-class B7 ADC into IND-enabling studies and continue to generate exciting data, supporting the potential of this agent to have a positive impact for patients with high unmet medical need.

Lastly, we executed a successful ATM transaction in April and a public financing in early June that added a combined $240 million in gross proceed, strengthening our balance sheet.

With a first-in-class candidate achieving proof-of-concept in ovarian cancer and proof of activity in lung adenocarcinoma, a second molecule with a potential for compelling differentiation to additional pipeline program approaching candidate selection, differentiated platform, a strong cash position and an experienced team, Mersana is in a good position to provide life-changing ADCs to cancer patients in need.

Let me now outline our efforts and upcoming milestones for the second half of the year. I'll begin with XMT-1536 again. Our objective with XMT-1536 is to continue to enroll in the ovarian cancer expansion portion of the study over the course of 2020. We had originally planned to recruit about 40 to 45 patients in the expansion cohort. But because of investigator enthusiasm for 1536, we expect to exceed this guidance by end of year. Given the deep responses achieved with XMT-1536 in patients with few options, some having [stalled] platinum as well as bevacizumab and PARP inhibitors, we are actively working on defining the path to registration.

Our goal is to meet with the FDA around the end of 2020 to gain their feedback. We believe based on high unmet medical need, discussions with KOLs and regulatory excellent as well as based on precedent that there is an accelerated approval plan in platinum-resistant ovarian cancer.

In addition to our preparations for the FDA discussion and the registration-enabling study, we are also developing our longer-term development plan and life cycle management plan for XMT-1536.

From an operational standpoint, we are expanding the number of sites in the U.S. as well as in Europe, Canada and Australia. We plan to provide a comprehensive update on XMT-1536 in ovarian cancer around the end of the year, given the significantly larger number of patients and longer follow-up expected, the FDA interactions regarding the registration path and the longer-term life cycle management plan. We will provide more details regarding the exact value of this update at a later time.

As for our next data update, I am pleased to report that our abstract has been accepted as an e-poster at ESMO's upcoming 2020 Virtual Congress in September. The e-poster is scheduled for September 17, 2020, and we plan to host a live conference call and webcast to discuss this data featuring key investigator, Dr. Erika Hamilton, Director, Breast Cancer and Gynecological Cancer Research Program from Sarah Cannon Research Institute at Tennessee Oncology on September 17 at 8 a.m.

The poster will be focused on ovarian cancer patients only. Note that the data cut off for the ASCO presentation was May 1. The data cut cutoff for ESMO will be in early August. Remember that the first [resist] assessment is after 2 cycles or 8 weeks. As a result, this disclosure will be an incremental update of the study with additional follow-up on the patients presented at ASCO, and will list assessments of a small number of additional patients who are either not available at the time of the ASCO data cut off or entered the clinic in May. Although this is incremental data, the goal of this disclosure is to increase awareness of XMT-1536 among Europe investigators so KOLs and clinicians. As I mentioned, the disclosure we plan to provide around year-end will provide a more comprehensive data set as well as the opportunity to discuss the path forward for XMT-1536.

We also continue to enroll lung adenocarcinoma. However, because of delays in initiating certain lung-focused international sites due to COVID-19, as well as the more intense competition for lung cancer patients, our recruitment rate have been difficult to predict. And at this point, we believe there will be challenges to achieving our previously stated goal of enrolling 40 to 45 patients in the expansion cohort by year-end.

On a positive note, we have begun to see easing of restrictions related to COVID-19 outside the U.S., which should allow us to initiate international sites in the coming weeks and months of accelerating the recruitment of lung patients through the rest of the year.

In addition, the initiation of international sites should also allowed us to broaden our reach and our geographic diversity to mitigate any potential regional reemergence of COVID-19, both domestically and globally. We will continue to evaluate our recruitment progress, and we'll provide updates, including the potential timing of our next data disclosure for this expansion cohort during our planned quarterly calls.

In parallel to the data from the XMT-1536 lung adenocarcinoma expansion cohort, we are dose escalating 1592 to gain a better understanding of its profile and its potential for clinical differentiation. As a reminder, the decision is to which molecule will take forward in lung adenocarcinoma, will be informed by both data sets and is expected in 2021.

Beyond the important milestones achieved with our clinical ADC candidates, we also continued to advance our late-stage discovery program, including our next first-in-class ADC candidate targeting B7-H4 and our immunosynthen ADC platform. We remain on track to reach an ADC development candidate milestone this year, including the disclosure of our B7-H4 ADC development candidate and of our first STING-agonist ADC candidate from our immunosynthen platform.

Before I turn the call over to Brian, I'd like to take a minute to discuss some management changes at Mersana. First, Eva Jack, our Chief Business Officer, will be moving on from Mersana to pursue new opportunities. I'd like to both recognize and thank Eva for all of her contributions. In her over 6 years here, she's played a key role in building a G&A team, driving partnerships as well as contributing to private and public financings, including playing a key role in the company's initial public offering. She's an exemplary leader and has built a very capable and high-performing team. We wouldn't be where we are today without Eva's critical contributions. Thank you, Eva, and all the best in your new endeavors.

Lastly, I would like to recognize Michael Kaufman and are now changing this title from Senior VP of CMC to Chief Manufacturing Officer. Michael joined Mersana in 2016, bringing with him a wealth of experience in process development, scale up, formulation and supply chain management across multiple therapeutic modalities, including ADC.

Since joining, Michael has proven to be a strategic leader with immense technical acumen. He's built a top-notch CMC team and under his leadership, they are working diligently to scale up our normal ADC platform as we advance XMT-1536, XMT-1592 and our robust pipeline of earlier-stage development candidates.

Congratulations, Michael, and thank you for your commitment and many contributions over the years as well as your continued leadership as we enter this important next stage of Mersana's development, focused on advancing our lead asset into pivotal studies.

And with that, I will turn the call over to Brian DeSchuytner for an overview of our financial results.

Thank you, Anna. Good morning, everyone, and thank you for joining us. Before I start, I'd like to also congratulate Michael, very well deserved. I'd also like to thank Eva for her many contributions over the years as well as her invaluable partnership [made] in my time here at Mersana.

I'll now review some of the key financial highlights from our second quarter 2020 results. I'll start with our cash position. We ended the second quarter of 2020 with approximately $291.4 million in cash, cash equivalents and marketable securities compared to approximately $100 million at the end of 2019. Cash used in operating activities in the second quarter was $15.9 million.

In April, we raised gross proceeds of approximately $65 million through our At-the-Market facility, or ATM, through the sale of approximately 10.9 million shares at an average price of approximately $6 per share. The transaction used the majority of our ATM facility, and we subsequently established a new ATM facility of $100 million as a housekeeping measure following the transaction.

As a reminder, in June, we raised gross proceeds of approximately $175 million through a public offering of 9,200,000 share at the offering price of $19 per share, which included the exercise in full of the underwriters' option to purchase additional shares of common stock. In addition to our current cash position, we have the option to draw additional funds of up to $15 million through the existing debt financing agreement with Silicon Valley Bank.

Today, we are providing updated cash runway guidance following the public stock offering. We expect that our current cash, cash equivalents and marketable securities, including the proceeds from the public stock offering, will enable us to fund our current operating plan commitment for more than 2 years.

And now some of the key highlights from our second quarter 2020 financial results. Collaboration revenue in the second quarter of 2020 was approximately $0.8 million compared to $0.2 million for the same period in 2019. The increase in collaboration revenue was primarily a result of the completion of research services associated with the target included in the Merck KgaA agreement.

Research and development expenses for the second quarter of 2020 were approximately $15.4 million compared to $13.8 million for the same period in 2019. The difference was primarily due to an increase in XMT-1536 and XMT-1592 clinical and regulatory expenses, a milestone payment related to the initiation of XMT-1592 patient dosing, XMT-1536 manufacturing and the advancement of companion diagnostics development efforts for the NaPi2b biomarker. All of these were offset by a decrease in preclinic development and manufacturing expenses for XMT-1592 and clinical and regulatory expenses for XMT-1522.

General and administrative expenses for the second quarter of 2020 were approximately $5.2 million compared to $4.2 million in the same period in 2019. The increase was primarily attributable to an increase in the valuation of stock-based awards granted to employees, resulting in higher noncash stock compensation expense.

Net loss for the second quarter of 2020 was $19.8 million or $0.33 per share compared to a net loss of $17.1 million or $0.36 per share for the same period in 2019. Weighted average common shares outstanding for the quarters ending June 30, 2020, and June 30, 2019, were approximately 61 million and 48 million, respectively. At present, we have 68.4 million common shares outstanding.

I will now turn the call back to Anna.

Thank you, Brian. The second half of 2020 has the potential to be as transformative as the first half of the year. Beyond our upcoming 1536 ovarian cancer disclosure at ESMO, we plan to share more comprehensive data with longer follow-up as well as regulatory interactions and development plans in ovarian cancer around year-end. We also intend to provide updates on our progress in lung cancer as we work to increase enrollment. Additionally, we are on track to disclose our B7-H4 DolaLock clinical candidate as well as the first immunosynthen STING-agonist ADC the second half of the year.

In closing, with very promising data we had from the Phase I study, we have established proof-of-concept for 1536 in ovarian. We've initiated the XMT-1592 Phase I dose escalation study to extend our leadership in the NaPi2b space and provide us a second shot on goal in lung cancer, and we continue to make great progress in advancing exciting pipeline development candidates.

We are in the fortunate position to have a strong balance sheet and an experienced team, passionate about advancing these assets and executing on our strategy of providing life-changing ADCs to cancer patients in need.

With that, I will turn the call over to the operator for questions.

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

First question in platinum-resistant ovarian cancer. What do you see as the benchmarks for durability of response in PFS?

Thank you for the question, Jonathan. Maybe I'll ask Brian to answer that question because he, over the last few months, have spent quite a lot of time with investigators and discussed sort of our path forward. So Brian, can you answer this question?

Sure. Absolutely. So in platinum-resistant ovarian cancer, the standard of care is single agent chemotherapy, either Doxil or topotecan. And there have been 3 contemporary randomized studies that show -- that use those agents in the control arm and show sort of a 4% to 12% response rate and a median PFS of 3 to 4 months. So when you ask what would we need to do to exceed that, we would want to show a response rate that excludes that 12% from the 95% confidence interval, which is probably around 25% if you think about 100 patients. And we've already, frankly, demonstrated that response rate above that level in the dose escalation and expansion. And so in bringing package to the FDA, we would look to showcase, not only the response rate, but the depth of response, the kinetics of response, meaning deepening over time, the duration of response, safety, tolerability and the robustness and reliability of the biomarker against which we're making significant investment.

Got it. Let me just try one more time. What would you need to show from a durability of response and PFS standpoint? I appreciate the color on the response rate, but on PFS and durability, any additional color there?

Sure. Well, so PFS is not generally viewed as a meaningful parameter in a single-arm study. But of course, duration of response is something that would be part of this context. And when we talk with investigators and former FDA reviewers, who are now regulatory controllers, they do really emphasize that the bright line is about the response rate and that the duration is considered in that context. The same way that safety or biomarker or depth and kinetics of response would be considered.

So if your question is what's a meaningful duration of response, these investigators and regulatory consultants generally say that 4 months is clinically meaningful in this population because remember, the standard of care is very poor. But this actually probably raises a larger point as well, which is that helping more patients for longer means moving to earlier lines of therapy, exploring combinations. We're viewing this platinum-resistant setting as a fast-to-market entry point in the end stages of the disease. But we hope to have a number of interesting options in earlier lines around which we'll share more details on our plans for 1536 around the end of the year.

Got it. That's very helpful. And just one follow-up. For the more comprehensive year-end 1536 data disclosure in ovarian, can you provide any more granularity on timing and venue? Are you thinking to present the update at a medical or scientific meeting? Or are you thinking more along the lines of a press release with a conference call?

So Jonathan, that's a good question. You recognize that a lot of these scientific conferences are either being canceled or going virtual. So we are keeping our options open. We would like to include in that a more comprehensive disclosure. And plans we have for -- further develop the plans we have for further development, any regulatory interaction. So there are multiple inputs into that. So we're keeping, at this point, our options open as to the exact venue, but either a scientific conference or a webcast would be possible this year.

And our next question comes from Boris Peaker with Cowen.

Congrats on all the progress. I guess my first question, Brian just discussed the historical standard of care in ovarian cancer. I'm just curious, have PARPs impacted that in some way, shape or form here? And do you think PARP treatment would impact your pivotal study in any shape?

So I'll start with that and then maybe ask Brian if he has anything else to add. The responses we've seen have included patients that have been treated with either PARP or bev or both. So we are seeing activity in patients that are pretreated with PARPs. So we're encouraged with the activity we've seen irrespective of what the prior treatments have been. Whether the standard of care has changed with the introduction of PARPs, I leave that to Brian as he has the specific knowledge on that.

Yes. I would say the principal issue here and the reason that there's such a high unmet need in the setting is that the introduction of new indications for the PARP inhibitors and frankly, for bevacizumab as well, have moved those into earlier and earlier lines of therapy. So while PARP inhibitors have labels in a portion of the platinum-resistant setting, most patients, by the time they get to platinum-resistant will have already seen a PARP. That's the way that trend is going. And so it's a little hard to say whether it affects the performance of the standard of care.

PARPs, generally, when used in earlier settings, don't advance the line because they're used as maintenance, which we would count as part of the same line. But I think it's very encouraging that the principal issue that physicians have today is what do I do with my PARP and bev-pretreated patients who have now failed platinum. We have shown pretty deep responses in.

Got you. My next question is for the lung indication. I'm just curious, if you don't reach your target enrollment, I think you said about 40, 45 patients, would you provide some kind of an interim update on the lung trial? And if so, any thoughts on potentially when that could be?

Yes. We -- so good question, Boris. And I think we are -- we want to see how enrollment goes with some of the international sites and are coming up to beginning to enroll. To be honest, I don't -- we have enrollment projections from those sites, but we live in an unusual world, as you can appreciate, and we want to see whether those enrollment projections will hold out in the current environment or not. We intend to continue to give updates on our quarterly calls. And as we get a critical mass of patient experience, we might very well share that data, as we did on the ovarian cohort where we were -- we have provided an interim update at ASCO and we'll provide another incremental but interim update at ESMO.

Great. My last question, on your meeting with the agency, with the FDA on kind of the end of Phase II meeting for ovarian, what are the kind of the key questions for that discussion? Or key sticking points, whatever you want to call it?

Yes. I think we want to share the data, we want to share what our thoughts are about the path forward and gain input from the FDA.

Our next question comes from Tom Shrader with BTIG.

Congratulations. Really a kind of a related question to Boris' question. In the 1536, 1592 switch in lung cancer, what do you need to see from 1592? Do you expect to have to get all the way through dose escalation and get an MTD? And are you trying to bias dose escalation to lung cancer patients or is that also difficult?

So the way we approach 1592 -- and we're obviously very pleased with the preclinical data and want to make sure we understand how that translates into clinical validation. So we're trying to move the dose escalation as quickly as we can, get them to be -- potentially at some patients at MTD to really understand the exposure, what is the MTD compared to 1536 and whether there are relative exposures. And we like that data, really drive where we go there.

Okay. Great. And then very quickly, the B7-H4 program, are you sure that's a cytotoxic payload? Has that decision been made given where the targets are?

Well, maybe I'll leave that to Tim to answer, but we definitely are excited about the B7-H4 with a DolaLock payload on.

Yes. No, thanks for the question, Tom. The -- you're right, B7-H4 is a very interesting target in terms of its expression profile, both on tumor cells as well as on tumor-associated macrophages. But just to hopefully clearly answer your question, the program that we're going to be announcing in -- by the end of the year is a DolaLock ADC. So it does use our controlled bystander cytotoxic payload, AF-HPA. But to your point, could you think of other platforms that we have that may be suitable for that target as well? Yes, that's something that we definitely do consider.

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

This is Aaron, by the way. So could you give us an update on the development of the commercial NaPi2b H-score assay? And when might we see this being deployed in the ongoing clinical studies?

So the assay is currently being deployed, not a commercial assay, but we are working towards the commercial assay and will incorporate it into the registration path. I think we'll be able to share a lot more information at that more comprehensive disclosure around year-end, but we are on track, and we'll have all the components in place including having interaction with the FDA regarding the development of the commercial diagnostic by -- at the time we get to that more comprehensive disclosure.

Okay. And then 1592 preclinical data, it appears more potent in [NaPi2b] as you guys have shown. And we know that it has a longer half-life. But can you tell us about safety profile expectations for 1592 and...

Yes. Obviously, it's still early in the dose escalation. The dose escalation will give us a lot of information about the clinical tolerability profile. But I can tell you that the (inaudible), which have proven to be quite translatable into the clinic in nonhuman primates, we see at least as good as safety profile in 1536. I'm saying at least because, obviously, the doses we explore in nonhuman primates are not so close together that you can see more subtle differences, but it's at least as safe and as tolerable as 1536.

And our next question comes from Mike Ulz of Baird.

Congratulations on all the progress. Just had a follow-up on 1592. And just wanted to clarify that you're still enrolling both ovarian and lung patients in the dose escalation. And then secondly, maybe you can just comment on the pace of enrollment so far. And I'm just trying to get an idea of how maybe lung might be tracking versus ovarian at this point, just given some of the competitive challenges you mentioned.

Yes. So our -- because the objective of the dose escalation in 1592 is to get to MTD as quickly as possible. So the study is open to both ovarian and lung cancer patients because that's the way to get to MTD as quickly as possible. Once we have that -- once we have the MTD, we'll be in a position to really, potentially, focus the recruitment on the patient groups that we are most interested in. But our objective now is dose escalation as quickly as we can. And we're moving to the doses at a reasonable pace. The first [few] doses are only 1 patient. But obviously, you have to wait through the DLT evaluation period even though those early cohorts are only 1 patient. And then we move into the 3 [that leads down].

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

I just want to thank everyone for joining our call today. I think the next 6 months are going to be equally exciting for us, and we really look forward to updating you on our progress, both on XMT-1536, XMT-1592 and our earlier pipeline. So thank you very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a good day.