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

Good day, and welcome to the Mersana Therapeutics Conference Call. [Operator Instructions] Please note that today's event is being recorded. At this time, I would like to turn the call over to Mersana's Senior Vice President of Investor Relations and Corporate Communications, Jason Fredette. Please go ahead.

Thank you, operator, and good morning, everyone. Before we begin, please note that this call will contain forward-looking statements within the meaning of federal securities laws. These statements may include, but are not limited to, those related to the therapeutic potential of our product candidates and our platforms, business strategy, clinical trial execution, regulatory engagements, plans and objectives, business development efforts, cost, operating expenses, cost reduction efforts and cash runway. Each of these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. These risks and uncertainties are discussed in our quarterly report on Form 10-Q filed with the Securities and Exchange Commission on May 9, 2023, and in subsequent SEC filings. Our filings are available at sec.gov and on our website, mersana.com. Except as required by law, we assume no obligation to update forward-looking statements publicly even if new information becomes available in the future. On today's call, we have Mersana's President and CEO, Anna Protopapas; our Chief Medical Officer, Dr. Arvin Yang; CFO, Brian DeSchuytner; and Chief Science and Technology Officer, Tim Lowinger. With that, let me turn the call over to Anna to begin the discussion.

Thank you, Jason, and hello, everyone. Let me begin our discussion by saying we are deeply disappointed by the outcome of the UPLIFT trial. We do, however, want to extend our sincere thanks to all of the patients, families and caregivers as well as the many investigators who took part in UPLIFT. Their participation and contributions are greatly appreciated. Now before we get into the details, let me summarize the key takeaways. As it relates to UPLIFT, unfortunately, the primary endpoint of the trial was not achieved. While the duration of response in the trial was greater than what was seen in our past clinical experience, the objective response rate failed to replicate what was seen from the dose expansion portion of our Phase Ib clinical trial in the near 100 patients. Our team is analyzing the data to identify factors that may help us better understand the results. In light of this outcome, we have made a number of difficult decisions that are intended to keep Mersana on sound financial footing and significantly extend our cash runway into 2026. This includes a restructuring plan involving approximately a 50% workforce reduction. We are also implementing a strategic re-prioritization to focus the organization on what we view as our best near-term opportunities, namely our next-generation Dolasynthen and Immunosynthen ADC platforms are product candidates from these platforms and our partner programs. With that, let me turn the call over to our Chief Medical Officer, Dr. Arvin Yang, to review the top line data for UPLIFT. Arvin?

Thanks, Anna. As most of you know, UpRi is a first-and-only-in-class NaPi2b ADC that was developed utilizing our original Dolaflexin ADC platform. UPLIFT is a single-arm trial that enrolled 268 patients with platinum-resistant ovarian cancer. Patients with up to 4 prior lines of systemic therapy were eligible to enroll in the trial, and all of them received a starting dose of 36 mgs per meter squared of UpRi. The primary endpoint for the trial was the investigator-assessed confirmed objective response rate, or ORR, in the NaPi2b-positive population, which was determined based upon a tumor proportion score, or TPS, of 75% or greater. UPLIFT's secondary endpoint included the ORR in the overall population, duration of response and safety and tolerability. In terms of the demographics, we believe that this was one of the most heavily pretreated populations that has been investigated in an ovarian cancer trial to date. All patients, of course, had received platinum therapy. Patients had received a median of 3 prior lines of systemic therapy with 31% of them having received 4 prior lines. In addition, 84% received prior bevacizumab and 69% received prior PARP inhibitor therapy. And finally, 53% of the UPLIFT patient population was determined to be NaPi2b positive. As for UPLIFT's primary endpoint, the investigator-assessed ORR in the NaPi2b-positive population was 15.6%. The ORR by independent radiology review was similar at 16.3%. These response rates did not exclude 12% from the lower bound of the 95% confidence interval, which was the goal for the primary endpoint. The ORR was also well below what we observed in our dose expansion experience. As you might recall, the overall ORR on an ITT basis across the NaPi2b-positive population in the expansion cohort was 26%, and it was 39% in the smaller subset of patients who were included in the 36-dose treatment. Among those patients who responded to UpRi, the investigator-assessed median duration of response for both the NaPi2b-positive population and the overall population was quite profound at 7.4 months. This is well above the duration of response we saw in dose expansion. Safety and tolerability data in UPLIFT was generally consistent with prior disclosures. As Anna noted, our team continues to analyze the data to identify factors that may help us better understand the results. This analysis will include an evaluation of the performance of the NaPi2b biomarker assay, the intrinsic heterogeneity of Dolaflexin and the characteristics of patients who responded to UpRi therapy, particularly those whose responses were deep and durable. We plan to present more detailed efficacy and safety data in the future in an appropriate medical or scientific forum. I'll now turn the call back to Anna.

Thanks, Arvin. Given the results from UPLIFT, we have made several strategic decisions. First, we will discontinue development activities related to UpRi, winding down substantially all of our UpRi-related program costs. This includes shutting down our UP-NEXT and UPGRADE-A clinical trials and hold the BLA readiness and pre-commercial launch activities. If a path forward for UpRi is warranted, following our full data analysis, we will consider strategic alternatives for the asset, including partnering. Second, we are significantly reducing Mersana's employee base. We have built a strong culture and a cohesive, high-performing team here at Mersana, so this was an incredibly difficult decision to make. Nevertheless, it's an action that's required to keep us on financial ground. We owe a debt of gratitude to our departing team members, and we are committed to strongly supporting them through their transition. Third, we will focus the company on Mersana's progressing next-generation Dolasynthen and Immunosynthen ADC platforms and product candidates as well as on the strategic collaborations we have developed in recent years. We have an ongoing Phase I trial of XMT-1660, a Dolasynthen ADC candidate targeting B7-H4. And we've made solid progress in dosing patients with breast, endometrial and ovarian cancer. All of these tumor types tend to have higher B7-H4 expression. We plan to complete this portion of the trial by the end of 2023 and enter the expansion phase of the trial in 2024. As a reminder, Dolasynthen is our new cytotoxic ADC platform. In multiple preclinical models, it has shown improved efficacy and safety when compared with our original Dolaflexin platform. We believe this is because unlike its predecessor and various other ADC platforms, Dolasynthen is designed to produce site-specific homogeneous ADCs. It also provides us with the ability to customize the drug-to-antibody ratio for different targets. Additionally, with respect to XMT-2056, our team is now working diligently to address the clinical hold that was placed on our Phase I trial earlier this year, and we are making good progress. XMT-2056 is our first Immunosynthen STING agonist ADC product candidate. It takes a HER2 epitope that is distinct from both pertuzumab and trastuzumab, providing both mono and combo therapy potential. As a reminder, GSK has a license option on 2056 that could be triggered following the dose escalation portion of our Phase I trial [ enriched ] for breast cancer patients. In addition to our 1660 and 2056 programs, we will continue to provide support to collaborators like Janssen and Merck KGaA. As a reminder, in 2022, we entered into a collaboration with Janssen Biotech to discover novel Dolasynthen ADCs directed against up to 3 targets and a deal with Merck KGaA for the discovery of up to 2 novel Immunosynthen ADCs. The Janssen and Merck agreements include over $1.8 billion in combined potential milestones as well as tiered royalties up to the low double-digit percentages on net sales. Now let me turn the call over to Brian for a few financial details.

Thanks, Anna. As you have heard, we've made the difficult decision to complete a workforce reduction of approximately 50%. We expect this effort to be completed by end of 2023 and estimate that it will result in nonrecurring expenses of $7 million to $8 million. We estimate that we ended the second quarter of 2023 with a balanced cash, cash equivalents and marketable securities of $286.6 million. Please note that this figure is preliminary and is subject to completion of our financial closing procedures. Our final cash balance as of June 30 will be included in our second quarter financial report in August. Given the actions that we are taking, we expect our available funds will be sufficient to support our current operating plan commitments into 2026. Note that this guidance does not assume any potential milestone payments from our collaborations.

Thanks for that, Brian. In summary, while this certainly was not the outcome we were hoping for from UPLIFT, we believe the investments we made in recent years to develop new ADC platforms, new candidates and new collaborations provide a strong foundation for future success. I would like to once again extend our thanks to the patients, caregivers and investigators who participated in UpRi as well as to the team here at Mersana that has worked tirelessly to complete the trial and assess the results. With that said, operator, would you please provide the instructions for our Q&A?

[Operator Instructions] Today's first question comes from Colleen Kusy with Baird.

On the UPLIFT study, any data that you're able to report on what the dose reductions and interruptions were and how many of those patients received the 36-milligram dose? And then I have a follow-up.

Yes. Thanks, Kelly, for the question. At this time, we're really limited to the data that's available in the top line disclosure. So we don't have that information available today.

Understood. And the bleeding events that you reported recently, I guess this is maybe still theoretical as you're still working through this, but any thoughts on what could have driven those bleeding events? And what sort of read-through you might seek for the Dolasynthen and Immunosynthen platforms?

So the most comprehensive data on the bleeding events is really the disclosure in June around the aggregate analysis. And we are looking into it with more -- in more detail to really understand what potential subsets of patients are at higher risk. As for Dolasynthen, as you know, it's a completely different platform with a different mode of bioconjugation, a different DAR, a different linker and, of course, completely homogeneous unlike Dolaflexin, which is intrinsically heterogeneous like most other ADCs on the market. In all our preclinical head-to-head studies, we've seen that Dolasynthen is both -- in many models, appears to be both more efficacious as well as better tolerated. So we're very excited about the Dolasynthen platform, about 1660, which, as I mentioned, is in dose escalation. And of course, Dolasynthen is also the subject of a partnership with J&J.

The next question comes from Ashiq Mubarack with Citi.

Sorry to hear the news. I guess, first, on the efficacy outcome. I guess, what are your working hypotheses as to maybe why the ORR underperformed relative to the Phase I? Do you think it was maybe driven by safety? Or are there maybe resistance mechanisms related to NaPi2b that are becoming clear? Or is there any color on that front you can share?

Yes, thanks for the question, Ashiq. So clearly, this was not the data that we are expecting based upon the almost 100 patients that we have treated in the dose expansion. So obviously, it's very disappointing for us. And it's a good question. We don't have the answer today, but we are doing an in-depth analysis. And some of the preliminary and initial inquiries that we're starting really actually focused on a couple of fronts. One is in regards to the NaPi2b assay and understanding the performance of that assay relative to the UPLIFT results. The other is actually also interrogating in relationship to the intrinsic heterogeneity that ADCs can have in relationship to their drug-to-antibody ratios. And the third, as you can imagine, is looking at the patient characteristics to better understand if there are factors that enrich for the probability of responses. And as I mentioned earlier, we did see some patients that had deep and durable responses on the study.

Okay. Okay, got it. And maybe one more. I guess it looks like there was a decent amount of variance, at least on the partial response and complete response numbers between the investigator-assessed and the IRR-assessed outcomes. Can you -- is there any color you can share on maybe, especially on the complete response rate, why there was significant variance?

I mean the overall response rate was actually quite similar between the investigator and the independent radiology reviews per se. And obviously, there can always be differences just in relationship to when the independent radiologists don't have access to clinical information. So that may result in some variation in relationship to that complete response rate. But one would sort of conjecture that that's not truly as significant given the overall response rate is quite similar.

Our next question comes from Kaveri Pohlman with BTIG.

Sorry about the news. I'm just wondering if you can provide any details on differences between the patient population between the 2 trials that could have led to differences in efficacy. I believe the previous trial did have some [ raise ] on platinum-free interval. Some patients who are -- who were considered platinum-sensitive, but they have already had like 4 prior lines of platinum rounds. So is this something that could contribute towards the efficacy difference?

Yes. So we're really limiting it to our top line data today. I think it's probably challenging to speculate right now. And we're doing that in-depth analysis, as I described to Ashiq, in relationship to looking at the patient characteristics as well as the performance of the assay as well as the variability of heterogeneity and the drug-to-antibody ratios. So we're looking actually quite broadly at this point in relationship to the results that really don't correlate with what we have seen in the expansion cohort.

Got it. And can you provide any additional color on bleeding events, whether they were observed mostly in platinum-sensitive or both sensitive and resistant patients?

So Kaveri, thank you for the question. Our analysis on bleeding is ongoing. And the most comprehensive disclosure is the one we made in early June associated with the aggregate analysis. And again, we are continuing to analyze both the UPLIFT, the UPLIFT data as well as other UpRi data we have. And at the time we have a more complete picture, we will be able to share that with the scientific and medical community.

Got it. And then maybe a last one, on these safety [ rounds ] also, is there any preclinical -- I guess, is there a way to test it preclinically to know whether these events, whether it's bleeding or pneumonitis, they are payload-related or target-related?

So first, I think as we've discussed before, we have generally believed that the generally low-grade, low-frequency pneumonitis we have seen in UpRi is we believe it's target-related. But of course, based on the preclinical work and the expression of the antigen in -- the expression of the antigen in lung, I think we're evaluating the bleeding incidents we've seen in UpRi. And as we get more information, we'll be able to share more with the scientific community.

The next question comes from Brian Cheng with JPMorgan.

Maybe one on UPLIFT data that you presented, can you provide some color on the discontinuation rate and tolerability profile that you saw in the study? And any color on how well the patients tolerated and whether there is any dose adjustment or dose holiday during the treatment?

Yes. Thanks, Brian, for the question. So we are really today limited, given how quickly we were turning this information around, to the top line data disclosures that we've presented. I've already indicated that we're really looking intensely in relationship to factors that may play a role in relationship to the outcomes that we've seen given that it does not clearly reflect what we've seen in the expansion cohort. And some of those interrogations do span essentially the questions that you are raising in relationship to patient characteristics as well as their tolerance of the drug and so forth. So we're looking into it at the moment.

I just want to maybe repeat that, Brian, our decision to terminate the UpRi program is really driven by the disappointing efficacy. And that's what really led us to move quickly to both disclose this data as well as make the right strategic decisions for the company. That's been our focus. We've moved very swiftly. Obviously, there's more data that's coming, and we will find the right opportunity to disclose that data and provide some of the answers to the questions you're all asking.

Okay. And maybe just one follow-up. So as we think about the rest of our portfolio today, do you think that there is potential for you to accelerate the 1660 program given today's update on UpRi? And can you remind us when the next data [ call ] is for 1660? And then just one more on the 2056, any color on where you are in the clinical hold for that program?

1660 is in dose escalation. It is on track. We expect that we will complete dose escalation by the end of this year and be in a position to start expansion cohorts next year. We have not committed to a data disclosure at this point because we would like to do that once we have a large-enough patient experience in therapeutic range that would be a meaningful disclosure to investors. But the program is on track. It is on track to complete dose escalation by the end of 2023. As for 2056, the team is working on understanding the data and charting the path forward, and we have made very good progress on that. So stay tuned.

Our next question comes from Boris Peaker with Cowen.

Just a real quick one for me. For 1660, can you comment on what data we should be expecting around year-end, approximately how many patients, maybe what indications? Yes, that's basically it.

Yes. Boris, actually, we haven't yet committed to timing for data from the 1660 program. What we have committed to is completing dose escalation later this year.

[Operator Instructions] Our next question comes from Asthika Goonewardene with Truist.

Really sorry to see this update today. And yes, I trust you guys are doing everything you can to move forward here. So maybe I just want to ask a couple of quick questions on what you have seen here. Can you provide any color on the response rate by prior lines of therapy? I'm just wondering if there was any subgroup of patients who maybe had less prior therapy who did a little bit better, who did as anticipated. I'm just trying to figure out where this ORR -- the negative ORR is coming from. And then I got a couple of quick follow-ups after that.

Yes. So Asthika, as I was saying, I mean, obviously, this day is very disappointing just in relationship to it given its inconsistency with what we have seen in the expansion cohort. We're really limited to the response rates by the -- what's disclosed in the top line disclosure data per se. But we are evaluating, obviously, patient characteristics, and prior lines of therapy will be one component of that.

Got it. Okay. And then, Arvin, just you mentioned that -- somebody else asked a good question of what could have gone wrong here. But when you're doing the autopsy of the data, you mentioned that the assay could have been one of the contributors. I'm just wondering, was that driven by anything? Did you see any sort of signal where you might have seen better-than-anticipated responses in some patients who were likely to be negative or low? Just maybe give us any sort of color on that. Or was that just more of a hypothetical?

Yes, I think we've heard that question. You're asking about the assay. I think if you look back to the expansion cohort, there was a very significant separation between the NaPi2b high and the NaPi2b low. So the NaPi2b high on an ITT basis was 26%, the NaPi2b low was 7%. Now when you look at this data, you'll see that there does not seem to be that level of enrichment. And that is one of the assays, and the ability of the assay to enrich for NaPi2b-high patients or NaPi2b-positive patients is one of multiple areas we are investigating.

Got it. And then lastly, heterogeneity is always an issue here. I'm just wondering, from a hypothetical standpoint, do you think that you're getting sufficient bystander effect? I know you've engineered specific things in your platform here. Was that limiting in any way? Or do you think that you get -- can we rest assure that you feel comfortable that with the Dolasynthen platform, you're getting the sufficient level of bystander effect that you want to see?

Look, there's a lot of work we need to do to understand the UpRi data. As I mentioned, we're stopping all investments while at the same time doing this analysis. And we do have a large data set of patient experience to really look at and understand what went wrong here and why these results are different than the expansion cohort. We remain very excited about 1660 and the Dolasynthen platform. And I -- maybe Tim here can walk you through why Dolasynthen is so different than the Dolaflexin platform.

Sure, I'm happy to. So as Anna mentioned earlier, Dolasynthen is our second-generation platform that allows us to balance the properties of each ADC in a completely homogeneous fashion. So we identify an optimized ADC and make every ADC identical in contrast to the Dolaflexin platform where we optimize on average within the population. We think that, that is an important differentiation based both on multiple preclinical experiments, looking at head-to-head comparisons where we see greater efficacy as well as greater tolerability across multiple antibodies and multiple models. And so with XMT-1660, we have done what we believe is an optimal DAR of 6, which is again another difference from UpRi, which was, on average, about 10. And so we see a lot of differentiation with Dolasynthen as well as not only preclinically, but from the limited clinical experience as well, also gives us the confidence that this is a platform that is very worth pursuing.

At this time, we are showing no further questions in the queue, and this does conclude our question-and-answer session. I would now like to return the call to CEO, Anna Protopapas, for closing remarks.

Thank you, operator, and thanks, everyone, for dialing in. We have a lot of work in front of us and a lot of opportunity as well. We look forward to keeping you posted about our progress. One final note, we will be issuing our Q2 press release and 10-Q in August. But given the scope of today's announcement, we are not planning to hold a conference call. That concludes our call, operator.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.