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

Hello, everyone. Apologies for the late delay here. I'm clearly not Albert Wong. My name is [indiscernible], and I'm a Vice President of Investment Banking at Morgan Stanley. Before we get started, I just need to read the quick research disclosure. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. So I would love to introduce Anna and Brian, CEO and CFO of the company. Welcome, guys. Thank you for joining us.

Thank you for having us.

So before we get started, anything you'd like to say to the audience?

Yes. This is a very exciting time at Mersana. Our lead asset is coming close to completing enrollment in a single-arm registration trial in platinum-resistant ovarian cancer. We should be closing enrollment around the end of this month. That puts us in a position for a top line readout and a BLA next year. We've initiated our confirmatory randomized trial in recurrent platinum-sensitive maintenance, another area of high unmet medical need. And then we move 2 new molecules into the clinic and completed 2 very exciting partnerships, one with Janssen, a subsidiary of J&J and the other with GSK. So really a very productive year, positioning us for what could very much be a transformative year in 2023.

Perfect. Well that's all very exciting. So how about we jump in here?

How would you say Mersana's platform is differentiated within the ADC space?

This is an exciting time in the ADC field. The modality has been validated. There is an acceleration of new ADCs that come to market. But our focus has always been around innovating with new platforms that can address the limitations of the first generation technologies. And at this point, we have 3 platforms, all supported by substantial data and all in the clinic. The lead platform, Dolaflexin, is incorporated into our lead asset. UpRi and that's differentiated, both in terms of the unique pharmacology of the payload, but also in terms of our ability to have a very high drug-to-antibody ratio that makes each internalization more efficient. We've demonstrated through substantial clinical data that the payload we have leads to a differentiated tolerability profile with no severe neutropenia, neuropathy or ocular toxicity, which is so common with other ADCs. Dolasynthen is our next-generation cytotoxic platform, uses the same payload, but allows us to add additional features such as a precisely dialing the drug-to-antibody ratio. And we know for a given target, there's a precise and optimal drug to antibody ratio. And that's the subject of -- that's the platform we use for 1660, a molecule we just took into the clinic. And then we've taken ADCs beyond cytotoxics by using our expertise in designing ADCs to bring forward an ADC, a platform we call Immunosynthen that delivers in a very targeted fashion, an innate immune stimulator. It's proprietary STING agonist where we could actually stimulate the innate immune system in a very targeted fashion. And we've just cleared the IND for our first Immunosynthen ADC. And this is the molecule that's a subject of a very substantial partnership we recently announced with GSK.

Great. Perfect. What have you shown thus far in terms of data for the UpRi?

Would you like to take that?

Yes. So UpRi is our lead asset in platinum-resistant ovarian cancer. And what we showed was a very robust about 34% objective response rate in those very heavily pretreated patient population. As Anna noted, the tolerability profile is also very different from what's been seen before. We don't see the severe neuropathy, neutropenia or ocular toxicity that really limits other ADC platforms. Moreover we have a biomarker, a robust reproducible biomarker that allows us to enrich for patients with higher NaPi2b expression. We use a tumor proportion score based cutoff to identify those patients as is typical for tests like that. And because we have actually studied the molecule in about 100 patients, we have a lot of data at different doses and regimens that allowed us to really optimize the right dose to take into the UPLIFT study, the single-arm registration study of the molecule.

Right. Perfect. That leads me into my next question. What's the status of the UPLIFT trial? And what bar do you think you need to meet to get accelerated approval?

Sure. So the single-agent chemotherapy standard of care in platinum-resistant ovarian cancer really has dismal performance. It's about a 12% objective response rate, maybe a duration of response of about 4 months. Patients in this setting have a median overall survival of less than a year. So with respect to this UPLIFT study, we're almost fully enrolled. We expect to be fully enrolled later this month. And that will set us on the path to a certain amount of follow-up where we'll be able to read out that study and submit a BLA.

Perfect. So what is your goal with the UP-NEXT program, trial, excuse me?

The UP-NEXT trial brings us into recurrent platinum-sensitive maintenance stage of the disease. It's an early stage of the disease, but an area of very high unmet medical need. We're looking at patients that have exhausted other maintenance therapies, specifically PARP and BEV, who have moved to frontline. We're looking at patients who for various reasons, either tolerability or biomarker status, cannot be treated with those other maintenance therapies. And we're looking at a population that was never part of the PARP maintenance therapies. These are patients who come off the carboplatin treatment and only achieve a stable disease. These are the areas of very high unmet need in the maintenance setting, and those are the populations that we will be studying in UP-NEXT. In recognition of the lack of a standard of care for these patients, both the FDA and the EMEA have agreed that placebo is the appropriate comparator arm in this study. We will be treating about 350 patients randomized 2:1 to active and placebo. And the endpoint will be PFS. We've just started screening patients. It's also important to note that there's been a lot of recent data surrounding the PARP inhibitors, which indicate that those agents are likely to be limited to the frontline setting, which leaves the unmet medical need in this recurrent platinum-sensitive maintenance setting to have an even bigger unmet medical need.

Perfect. I think you spoke to a little bit, but anything further you would like to say on the UP-NEXT trial design?

It's essentially 350 patients, 2:1 randomization to placebo. We are selecting for NaPi2b high because in the maintenance setting, we want to make sure we're focused on the highest -- the enriched outcomes that we know we get with NaPi2b selection.

Perfect. And what would you say your goal is with UPGRADE?

UPGRADE is a Phase I/II study, it's actually an umbrella study and the first combination we're studying is a combination with carbo. The UPGRADE study is intended to give us data that will help us make decisions about further label expansion and potentially the design of our frontline study. Carbo is the standard -- the platinum is the standard of care in ovarian cancer patients treated with platinum in frontline, in second line until they become platinum-resistant. It's given typically in combination with paclitaxel. Our objective is to replace paclitaxel, which is a very toxic agent, for the fixed 6 cycles that the combination is given, but then continue with UpRi as a single agent. So it would be induction followed by maintenance. We believe we can deliver a more efficacious and better tolerated agent. That's what we're trying to demonstrate in the Phase I/II study of UPGRADE if we're successful in demonstrating that we have the potential to establish a new standard of care in platinum-sensitive disease.

Wonderful. Thank you. I think that was a helpful overview of the pipeline of the ongoing trials and programs. And we kind of shift towards BD and some collaborations. You mentioned it at the beginning. How is the collaboration with GSK structured?

Yes. So the GSK collaboration is structured as an option. It's not a license. So we received $100 million upfront for an option to license XMT-2056, our HER2-targeted Immunosynthen after we create a data package that we refer to as the opt-in data package. That data package is based on data that we'll deliver from the Phase I dose escalation with some enrichment for breast cancer because that's obviously the largest market opportunity. Importantly it's not at the end of Phase I, right? So expansion cohorts would happen after that opt-in decision. So in addition to the $100 million upfront, that opt-in fee is about $90 million. There are $30 million worth of milestones that could be triggered before or around the time of that opt-in data package. If GSK decides to opt-in, they would be responsible for the majority of development costs. We will receive milestones that would largely offset our development costs. Our development cost contribution would be capped, and we have certain other features that really drive the cash flow that we would put into the program. We retain an option to participate in a U.S. profit share or if we elect not to participate in a U.S. profit share, we could receive royalties up to the mid-20% range. So the deal in totality allows us to really take a full force of a partner who has experience in ADCs and IO and in STING and apply that to what could be a really transformative molecule in this space.

We've also -- we've achieved a number of objectives with the GSK deal. Obviously the upfront is very meaningful for the stage of the molecule. But we retain control of early development, was really important to us because we are learning about the platform, and we have multiple additional Immunosynthen molecules right behind 2056. We've limited our cash outlay in the co-development. As Brian indicated, it's been offset by milestones as well as capped. And yet we have the opportunity to participate in a very meaningful way in what could be a huge upside in this molecule. Pre-clinically with 2056, we've seen single-agent activity in HER2 high, in HER2 low. Tumors, we've seen combination synergy within HER2 with trastuzumab and with PD-1. So this could really be a very important treatment for patients who express HER2.

Perfect. Well, that's helpful. And I think GSK is not your only program in collaboration in process. Can you talk to us a little bit about your BD deals with Janssen?

Yes, absolutely. So in February of this year, we signed a deal with Janssen for our -- access to our Dolasynthen platform. Dolasynthen, as Anna talked about, is our homogeneous site specific. We can optimize platform where we can select the drug to antibody ratio. This is really the product of probably about a year analysis by Janssen of the ADC landscape. And they will bring 3 targets. We would apply the platform to those targets, and they would advance those and we would receive milestones and royalties. We got about $40 million upfront from the Janssen collaboration. And we really like collaborations like this because it allows us to expand the scope of the platform, really validate it against different targets, targets that we wouldn't be working on. And we retain the rights to use that Dolasynthen platform on our own targets, our partner, with others just the same. So that's an exciting collaboration that continue to move forward as well.

Very exciting time in the ADC field. There's a renaissance of interest, and we find ourselves to have invested and developed these innovative platforms that really can be the basis of continued business development activity.

Right. And how likely do you believe that you'll be able to sign an additional BD deal over the next 12 months or so?

Brian doesn't want to answer that in case it goes into his personal goals. We are engaged in multiple discussions. They are focused on our platforms or the early pipeline. And I think I'm optimistic that given the level of interest and activity, there's more to be done in the next 12 months. Obviously these things are not done until they're done, and sometimes the exact timing doesn't work. What we are not engaged in is partnering on UpRi. We might eventually pursue partnering regional partnering. But at this point, we're so close to the readout of the UPLIFT study that it doesn't make sense to engage in partnering of UpRi at this point.

Of course. No, that makes sense. Shifting a little bit, you mentioned XMT-2056. Can you provide a little background about XMT-2056 and XMT-1660 and the stage of development?

I'll start with XMT-1660. It is a Dolasynthen ADC against B7-H4. B7-H4 is a great target for an ADC. It's expressed broadly in a number of tumors. We are focused on breast, endometrial and ovarian cancer because that's where it's expressed most highly, but there are others we could pursue in the future. We're taking a platform and a payload we understand very well and believe we can get to selection of a Phase II dose and eventually to proof of concept in a reasonable timeframe because we've gone down this path before with UpRi. There are opportunities potentially for accelerated approval. And we're really excited to be in the clinic dosing patients and really moving that molecule forward. I'll let Brian describe 2056.

Yes. So 2056 is really the first molecule that we've advanced on our Immunosynthen platform. And as Anna alluded to at the beginning, it takes ADCs beyond cytotoxics and it is a targeted innate immune stimulation. We've built that platform from the ground up using learnings that we have had from our other platforms and how to really make a differentiated ADC technology. We have a proprietary and novel STING agonist payload that we attach to a scaffold linker that we attach to a novel proprietary antigen, excuse me, antibody that targets a different epitope of HER2 than the other available therapies today. So that affords us combination opportunities. And it affords us a very different way of coming at that target than what exists today. So we cleared the IND on that earlier this year and are working to initiate the Phase I study, which will be a pretty typical Phase I dose escalation study in HER2-expressing tumors like breast, gastric, lung and some others.

Wonderful. And you mentioned the renaissance interest in the ADC landscape. And we've already covered some of the exciting developments you guys have here. Anything else worth noting in the ADC landscape that you would like to point out?

Well, I do think that pharmaceutical companies that are in oncology are looking to have a variety of therapeutic modalities and ADCs is definitely part of the tool set they want to have. And I think that's, to a large extent, driving the renaissance in ADCs. So that's one point I want to make. The second one is that we're only in the cusp of innovating in this field. We are continuing to learn with every molecule we take forward, how to do even better than what we've already done, more payloads, different payloads, different linkers. And I think at Mersana, we've built an incredible expertise in how you design and optimize an ADC. And I feel we're only on the cusp of what we can do for patients.

Perfect. I would agree. It's very exciting. Given the time, I just want to open it up if we have any questions from the audience. Any other comments you would like to make to the audience?

We've had a very productive year. We've really advanced UpRi. We've advanced the pipeline. We've obviously strengthened our company through these very important strategic partnerships, and we're poised for a very important 2023. Readout on our lead asset, advancement of the other trials associated with UpRi, filing of a BLA with positive data readout and then really advancing 1660 and 2056, potentially other partnerships. And we have a very strong discovery group that's really efficient product engine to continue to bring molecules that make a difference in patients.

I would agree. It sounds like there is quite an exciting future for Mersana in the next 6 to 12 months. Well, perfect. There is no further comments from the audience. I think that concludes our session.

Thank you so much.

Thank you all for coming.

Thank you, everyone.