Mersana Therapeutics, Inc. (0M40.F) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Mersana Therapeutics Annual Meeting of Stockholders. I will now turn the program over to Chairman of the Board of Directors, David Mott. Dave, you may begin.

Good morning, everyone. It's 9:00 a.m. I'm David Mott, Chairman of the Board of Mersana Therapeutics, and it's a pleasure to welcome you to Mersana's 2020 Annual Meeting of Stockholders, which I now call to order and for which I will be acting as Chairperson. I'd now like to introduce Anna Protopapas, Mersana's Chief Executive Officer, who will proceed with the business of the meeting. Anna?

Thank you, Dave, and thank you all for attending today's meeting. In keeping with all that Mersana has done in the past several months to continue operations in the midst of the COVID pandemic, we are hosting our annual meeting virtually this year. As is our custom, we will conduct the business portion of our meeting first and answer questions at the end of the meeting. Before we proceed further, I would like to introduce the company's directors and officers. In addition to Chairman Mott, the following directors are in attendance: Larry Alleva; Will Dere; Andrew Hack; Kristen Hege; and Marty Huber. The following executive officers of the company are also present: Brian DeSchuytner; Dirk Huebner; Eva Jack; Michael Kaufman; and Tim Lowinger. Also in attendance are Brendan McCorry, partner at Ernst & Young, our independent auditors; and Marc Rubenstein, partner at Ropes & Gray, our external legal counsel. We and Mr. McCorry will be available during the question-and-answer session after the meeting to respond to appropriate questions. Finally, the company has appointed Jennifer Borden from Borden Consulting Group LLC to serve as the inspector of elections for this meeting. We will now conduct the formal business of the meeting. For this formal section of the 2020 Annual Meeting of Stockholders, Jonathan Owen, Legal Counsel for Mersana, will record the minutes of the meeting. Jonathan, please lead us through the next portion of this meeting.

Thank you, Anna. This meeting will be governed by the rules of conduct that are linked to the stockholder meeting's landing page. I have proof by affidavit that a notice of this meeting was sent to all stockholders of record as of the close of business on April 15, 2020. In addition, a list of the stockholders of the company as of the close of business on April 15, 2020, is available to all stockholders of record in a link on the stockholder meeting's landing page, in accordance with Delaware Law and will remain available until the polls are closed. The inspector of elections has advised me that we have present, by proxy and in person, a sufficient number of shares to constitute a quorum. Therefore, this meeting qualifies for the transaction of business. Stockholders will be taking action on each of the matters listed in our proxy materials. [Operator Instructions] It is now 09:03 a.m. Eastern Time on June 12, 2020. The polls are now open for voting at this annual meeting. If you have not previously submitted a proxy and wish to vote, you may do so by clicking on the voting button on the web portal and following the instructions there. Stockholders who have sent in proxies or voted via telephone or internet and do not want to change their vote, do not need to take any further action. The first item of business is the election of 3 directors to the company's Board of Directors to serve a 3-year term and until his or her successor is duly elected and is qualified or until his or her earlier death, resignation or removal. Upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated Lawrence Alleva, David Mott and Anna Protopapas, each an incumbent to serve as directors. The second item of business is the ratification of the Audit Committee's appointment of Ernst & Young LLP as the independent registered public accounting firm of the company for the fiscal year ending December 31, 2020. No additional nominations or proposals were received in advance of this meeting in accordance with the company's bylaws and the SEC's proxy rules, so no other nominations or proposals will be considered today. The Board of Directors has unanimously recommended that stockholders vote for the election of the nominees, Lawrence Alleva, David Mott and Anna Protopapas to the Board, each to serve a 3-year term and until his or her successor is duly elected and is qualified or until his or her earlier death, resignation or removal; and for the ratification of the Audit Committee's appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ended December 31, 2020. We will now consider any questions or comments from stockholders related to the business of the meeting. There being no questions or comments, we will now pause for the completion of voting. [Voting]

The polls for each matter to be voted on at this meeting are now closed at 09:05 a.m. June 12, 2020. The votes represented by proxies received prior to the meeting have been tabulated by the inspector of elections. The inspector of elections will count the votes. Ms. Borden, will you please present a preliminary report on the vote?

Jonathan, the election of each of Lawrence Alleva, David Mott and Anna Protopapas to serve as a Director has been approved. The ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020, has been approved.

Thank you, Ms. Borden. We will report the final voting results in a Form 8-K to be filed within 4 business days. There being no further business to come before the meeting, the 2020 Annual Meeting of Stockholders of Mersana Therapeutics is now adjourned. Mr. DeSchuytner will now give a brief presentation followed by a question-and-answer session. First, a legal disclaimer. This presentation and subsequent responses to questions may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are not statements of historical facts and are based on management's beliefs and assumptions and on information currently available to management. Forward-looking statements include information concerning the company's business strategy and the design progression and timing of its clinical trials and expectations regarding future clinical results based on data achieved to date. Forward-looking statements represent management's beliefs and assumptions only as of the date of this annual meeting. The company's operations involve risks and uncertainties, many of which are outside its control and any of which or a combination of which could materially affect its results of operations and whether the forward-looking statements ultimately prove to be correct. Factors that may materially affect the company's results of operations and whether these forward-looking statements prove to be correct, include the risks listed in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2020, and the Company's quarterly report on Form 10-Q filed with the SEC on May 8, 2020, and subsequent SEC filings. Brian?

Thank you, Jonathan. Mersana was founded on the vision that innovative new ADC platforms that address the limitations of the first-generation approaches could lead to therapies that could significantly improve outcomes for cancer patients in need. 2020 is a year with multiple clinical milestones, allowing us to demonstrate the power of this vision. XMT-1536, our lead asset, is a first-in-class molecule addressing significant patient needs in ovarian and lung adenocarcinoma. We disclosed data that demonstrate the potential of XMT-1536 to have a meaningful impact on platinum-resistant ovarian cancer patients. I will spend the majority of today's presentation on XMT-1536. However, beyond XMT-1536, we have an exciting pipeline with 1 Phase I and 2 development candidates moving forward this year. Our innovative and highly differentiated ADC platforms, which include Dolaflexin and Dolasynthen, delivering our DolaLock payload as well as our Immunosynthen platform, delivering a proprietary STING agonist, provide an efficient product engine to continue to grow the pipeline. We are in the fortunate position to have a strong balance sheet with approximately $300 million in pro forma cash as a result of the ATM transaction and the public offering. We have an experienced team, passionate about advancing these assets and executing on our strategy to help patients in need. Before jumping into our programs, on the next slide, I'd like to give you some background on our technologies and platforms. The DolaLock payload is our proprietary cytotoxic payload that is the basis of both Dolaflexin and Dolasynthen. The DolaLock payload's unique pharmacology allows for controlled bystander killing. It's capable of bystander killing when first released into the cell that has been metabolized. The metabolite is locked in the tumor, still a potent cytotoxic, but not able to travel further and enter healthy tissues. As a result, both preclinically and clinically, we do not see the severe toxicities associated with other ADC platforms, such as neutropenia, neuropathy or ocular toxicity. Additionally, the DolaLock payload is not a Pgp substrate, avoiding a major mechanism of resistance in cancer. Dolaflexin, our lead platform with the DolaLock payload is the one incorporated into XMT-1536. The benefits of Dolaflexin in terms of both efficacy and tolerability have been demonstrated preclinically and now supported by the exciting clinical data that I'll share with you. Dolasynthen carries the same DolaLock payload that provides for the potential for precise DAR and homogeneous ADCs. These features allow for customization of an ADC for a specific target and can result in differentiated profiles versus Dolaflexin. And lastly, Immunosynthen takes our efforts beyond cytotoxics, with a proprietary STING agonist molecule that can be delivered in a targeted manner to the tumor and the tumor microenvironment without the liabilities of systemic delivery to activate the innate immune system. These platforms represent a significant advancement in the ADC field and provide an efficient product engine to fuel Mersana's pipeline and catalyze partnership opportunities. On the next slide, turning to our robust pipeline of clinical and preclinical development candidates, I will spend most of the time today on our lead candidate, XMT-1536. But before I go there, let me also briefly introduce the 3 other most advanced programs. XMT-1592 is our second ADC-targeting NaPi2b and was created using our Dolasynthen ADC platform. Preclinically, XMT-1592 has shown a differentiated profile, particularly in lung cancer. And specifically in lung tumor models, XMT-1592 was fourfold more efficacious than XMT-1536, consistent with increased exposure to the DolaLock payload in the tumor. We now look to validate the potential of XMT-1592 in the clinic and just recently announced that we initiated patient dosing in a Phase I dose-escalation study of XMT-1592. Next, we selected B7-H4 as our next target, another first-in-class ADC. B7-H4, as an ADC target, has a very unique expression profile. It's expressed on tumor cells, but it's also expressed on immunosuppressive tumor-associated macrophages. We have compelling efficacy and nonhuman primate tolerability data with both Dolaflexin and Dolasynthen, and we have initiated IND-enabling studies. And we'll be disclosing our candidate selection and data package in the second half of this year. And using our Immunosynthen platform, we've developed a proprietary STING agonist ADC platform. We have generated compelling data set, validating our approach across multiple targets and are on track to select our first Immunosynthen ADC to move into IND-enabling studies this year. Turning now to XMT-1536, our first-in-class Dolaflexin ADC targeting NaPi2b, on the next slide. I'll speak briefly about NaPi2b as a target. NaPi2b is broadly expressed in NSCLC adenocarcinoma and ovarian cancer, but with limited expression in healthy tissue, making it an excellent ADC target. In preclinical studies, highlights of which are shown in this graph, we have a strong correlation between response and H-score, a measure of biomarker expression. And we've developed a proprietary and robust asset to measure H-score in clinical trials and are in the process of validating with a commercial vendor a companion diagnostic, as we anticipate based on both this preclinical data and the clinical data that a patient selection strategy will be part of the development and registration of XMT-1536. On the next slide, the unmet need is significant in ovarian cancer and NSCLC adenocarcinoma. The patients in the dose-escalation portion of the study, which we disclosed on March 30, had a median of 5 prior lines of therapy and had exhausted the standard of care and often progressed on experimental therapies as well. Longitudinal studies have shown that as ovarian cancer patients’ progress, the potential for a response decreases rapidly with line of therapy and that the expected response rate is close to 0 for these ovarian cancer patients. The patients in the dose-expansion portion of the study are still late-stage and mostly platinum resistant, but are more homogeneous with up to 4 prior regimens. For these patients, the standard of care is single agent chemotherapy. Two cohorts are being enrolled in this expansion study: Patients with high-grade platinum-resistant serous ovarian cancer with 1 to 3 prior lines of therapy, or in some cases, 4 prior lines of therapy regardless of platinum status; and patients with lung adenocarcinoma, who had received prior treatment with a platinum-based therapy and a checkpoint inhibitor or have exhausted targeted therapy if their tumors harbor oncogenic driver mutation. The current standard of care in the platinum-resistant ovarian cancer setting is single agent chemotherapy, and multiple contemporary studies have demonstrated the performance of the standard of care is a response rate between 4% and 12% and a median PFS of 3 to 4 months. Based on precedent and feedback from our investors and -- investigators and regulatory experts, we believe that we have a fast-to-market path using a single-arm registration study. And we can show a response rate that excludes the historical standard of care from the 95% confidence interval. That's approximately a 25% ORR, a threshold we have exceeded in both the dose escalation and the current interim readout of the dose expansion. In the NSCLC adenocarcinoma expansion cohort, our objective is to enroll 40 to 45 patients. In NSCLC, the standard of care following progression on checkpoint inhibitors and platinum-based chemotherapy, or failure of targeted therapy for patients with tumors harboring an oncogenic driver mutation, is docetaxel alone or in combination with targeted therapy. This standard of care has an overall response rate of 14% to 23% and a median PFS of 3 to 4 months. On the next slide, the dose-escalation study data showed that XMT-1536 is well tolerated without the severe toxicities of other ADC platforms, such as neutropenia, peripheral neuropathy or ocular toxicity. The most common treatment-related adverse events were grade 1/2 nausea, fatigue, headache and the most frequent grade 3 treatment-related adverse event was transient AST elevation without associated changes in bilirubin or cases of Hy's law. In addition, a favorable biomarker response trend was observed for the subset of evaluable patients treated at 30 mg per meter squared and above, who had higher NaPi2b expression. 5 out of 15 or 33% of patients achieved partial responses, and another 6 out of 15 or 40% of patients achieved stable disease for a disease control rate of 11 out of 15 or 73%. In contrast, there were no responders in the low NaPi2b expressing group. This is important because it indicates the potential for a patient selection strategy, which can identify patients most likely to benefit from XMT-1536. The fact that we saw multiple confirmed responses and durable stable disease in this patient population is very encouraging, and we saw our first confirm partial response in a non-small cell lung cancer adenocarcinoma patient. On the next slide, moving to the dose expansion study data that we presented on May 27. As of the cutoff date, we had enrolled 34 patients, 27 of these patients had ovarian cancer and 7 had lung adenocarcinoma. The ovarian cancer population had a median of 3 prior lines of therapy and the lung adenocarcinoma patients had a median of 2 prior lines of therapy. All patients with ovarian cancer had received prior platinum- and taxane-containing therapies with the majority of those also receiving prior bevacizumab and/or PARP inhibitors. All patients with lung adenocarcinoma had received prior platinum pemetrexed and immune checkpoint inhibitors. XMT-1536 continued to show a favorable safety profile. Consistent with the previously presented data, XMT-1536 was generally well tolerated without the toxicities observed with other ADC platforms such as severe neutropenia, peripheral neuropathy or ocular toxicity. The most frequently reported treatment-related adverse events included generally grade 1 and 2 fatigue, nausea, vomiting, pyrexia, decreased appetite and transient AST elevation, which recovers by the next dose. No changes in bilirubin or Hy's law cases have been observed and the transient AST elevations are easily monitor-able with standard lab tests. Turning to efficacy data. These interim data suggest that 1536 continues to be an active drug in ovarian cancer. Of the 27 patients with ovarian cancer, 20 were evaluable for RECIST response with at least 1 scan. In the 20 evaluable patients of platinum-resistant ovarian cancer, we observed 2 complete responses, in both patients with confirmed complete responses and prior treatment with bevacizumab and PARP inhibitors. The objective response rate is 35%, and the disease control rate is 80%. Importantly, responses appear to deepen over time. These data are very encouraging, especially because it's uncommon to see complete responses in this platinum-resistant patient population. In the expansion portion of the study, NaPi2b expression is being evaluated by immunohistochemistry in the archives and were available in fresh tumor tissue, and a correlation between biomarker expression and clinical responses being explored as part of companion diagnostic development. These data continue to support the potential for a NaPi2b biomarker-based patient selection strategy. And we will define the threshold once we have the complete data set. With very promising data in hand from both the dose escalation and dose expansion portions of the Phase I study, we are well on our way to establishing proof of concept for XMT-1536 in ovarian cancer. Lastly, on the next slide, I'll summarize our goals and milestones for this year. We have reached 2 of the 3 important data readout for XMT-1536 this year. We plan to provide a more mature look at data in ovarian cancer from the expansion study in the second half of the year and remain on track to deliver on that goal. As we have said, our recruitment in lung adenocarcinoma lags behind ovarian cancer. But we aim to complete the recruitment of this expansion cohort by year-end. For XMT-1592, our Dolasynthen ADC-targeting NaPi2b, we recently achieved our goal of initiating patient dosing in the dose escalation portion of a Phase I study and will continue to work to achieve rapid dose escalation throughout the remainder of the year. We also continue to make great progress in advancing 2 exciting pipeline development candidates. And we believe we're on track to disclose our B7-H4 and STING ADC development candidate and a supporting data in the second half of this year. And we will continue to maintain a strong organization with top caliber talent and leverage strategic partnerships to continue to build value. It has been a very productive year so far, and we look forward to updating you on our continued progress throughout the remainder of the year. Thank you for your time.

Thank you, Brian. We would now like to open things up for stockholder questions and comments. [Operator Instructions] All right. Not seeing any questions, I turn this back over to Anna for last comments.

There being no further questions, I would like to conclude by thanking our stockholders for their attendance today and continued support of our company. Thank you.

Ladies and gentlemen, this does conclude your call. You may now disconnect your lines.