Mersana Therapeutics Q3 2024 Earnings Call Transcript

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November 13, 2024

There are 13 speakers on the call.

Operator

Good morning, and welcome to Mersana Therapeutics' Third Quarter 2024 Conference Call. Currently, all participants are in listen only mode. There will be a question and answer session at the end of this call. Please note this event is being recorded. I would now like to turn the conference over to Jason Ferdette, Senior Vice President, Investor Relations and Corporate Communications.

Operator

Please proceed.

Speaker 1

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 our platforms, product candidates, business strategy, clinical trial execution and data, business development efforts and cash runway. Each of these forward looking statements is 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 August 13, 2024 and in subsequent SEC filings.

Speaker 1

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 Chief Executive Officer, Doctor. Marty Huber our Chief Development Officer, Mohan Bala and our Chief Operating Officer and Chief Financial Officer, Brian De Scheitner. With that, let's turn the call over to Marty to begin our discussion.

Speaker 2

Thank you, Jason, and good morning, everyone. I'm pleased to report that Mersana made significant progress in the 3rd quarter as we continued to dose escalate in our Phase 1 clinical trials of both XMT 1660 and XMT 2056. We also achieved multiple milestones in our research collaborations and we maintained the strength of our balance sheet. These accomplishments position us well as we prepare to disclose initial XMT 1660 clinical data at a company event by the end of this year. XMT 1660 is Mersana's ADC candidate targeting B7H4 that was developed using our dolacinthin platform with site specific bio conjugation and a drug to antibody ratio of 6.

Speaker 2

We believe it has the opportunity to differentiate within the broader ADC landscape in multiple ways. The dose escalation portion of our Phase 1 clinical trial is ongoing and we still have not established a maximum tolerated dose. We recently escalated to 115 milligrams per meter squared or about 3.1 milligrams per kilogram every 4 weeks. This is up from the 80 milligrams per meter squared dose we mentioned on our last conference call and it's well beyond the highest doses we investigated with any of our prior ADCs. We believe our ability to reach this dosing level speaks both to Dolasynthen's differentiated tolerability profile and to the limited expression of B7 H4 in healthy tissue.

Speaker 2

In parallel with our dose escalation work, we are continuing to investigate more frequent dosing schedules for XMT 1660 and we're working to refine our biomarker strategy to prepare for expansion and later stages of development. Let me turn the call over

Speaker 3

to Mohan Bala, our Chief Development Officer to share a little more color on our enrollment in this trial and one of the indications we are focusing on. Thanks, Marty. As a reminder, the dose escalation portion of our Phase 1 trial of XMT-sixteen sixty is being conducted exclusively in the US and it is enrolling patients with the cancers that most commonly express B7e4. These include heavily pretreated patients with recurrent, triple negative and HR positive breast cancers, endometrial cancer and ovarian cancer. We believe XMT-sixteen sixty has the potential to address important unmet needs for patients with each of these tumor types.

Speaker 3

That said, about 3 quarters of our enrolled patients have breast cancer. Today in the US, topoisomerase-one ABCs are being used very frequently in breast cancer. In fact, approximately 90% of our enrolled patients with triple negative breast cancer and about half of our HR positive patients have been treated with at least one prior topo-one ADC, whether it be TREDOVI or NR2. We have discussed previously the growing body of retrospective data demonstrating that patients develop resistance to TOPO-1 payloads. This has become a significant concern for physicians.

Speaker 3

At ESMO in September, the first prospective data exhibiting the same phenomenon were presented by a competitor that's developing a topo1b784 ABC. The Phase 1 dataset included 8 patients who had previously been treated with a topo1 inhibitor, and notably none achieved an objective response to the competitor's ADC. These presentations help to reinforce the urgent need for ADCs with non topo payloads in breast cancer, and XMT 1660 fits this profile. In fact, just last week at the 15th Annual World ADC in San Diego, we presented new preclinical data demonstrating XMT6060's anti tumor activity following topo-one treatment. So what is the standard of care today for patients with late stage breast cancer who already have received a TOPO-one ADC?

Speaker 3

Well, it's generally single agent chemotherapy and the prognosis for these patients is exceedingly poor, as evidenced by data for the control arm in the ASCEND trial for TREDALV in TNBC. Importantly, ASCEND may be a potential best case as this trial enrolled patients who were naive to the treatment with topo-one ADCs. Now back to

Speaker 2

Martin. Thanks Mohan. In multiple presentations over the course of the past year, we have shared data demonstrating the potential for dolacinth and ADCs to generate anti tumor activity and avoid many of the toxicities that have limited other ADC platforms. We believe our initial XMT 1660 data will shed light on its clinical potential across tumor types, including in patients who have previously received topa-one ABCs. We expect to present our initial clinical safety, tolerability, efficacy and biomarker data from dose escalation and backfill cohorts at a company event by the end of this year.

Speaker 2

On the safety side, we would hope to show a profile that is differentiated from other ADCs. And on the efficacy side, we expect to characterize the relationships between anti tumour activity and dose as well as anti tumour activity and B7 H4 expression. In addition to our expected data disclosure, we also remain on track to initiate the expansion portion of our Phase 1 clinical trial of XMT1616 by the end of this year. In fact, we have already determined that our first area of focus for expansion will be patients with triple negative breast cancer who have previously received at least 1 topo-one ADC. Beyond XMT 1660's potential as a monotherapy, we would hope to demonstrate a profile that may be amenable for use in combination with other agents, including combinations that we believe our competitors would not be able to pursue.

Speaker 2

As a reminder, dolacinthin ADCs are equipped with a proprietary orastatin payload that has been shown clinically to avoid dose limiting severe neutropenia, peripheral neuropathy and ocular toxicity. These types of adverse events are preventing many of today's ADCs from combining with certain standards of care due to the risk of overlapping toxicities. Now let's turn to XMT-two thousand and fifty six. This is our lead candidate that was developed utilizing immunosymphem, our innate immune stimulating ADC platform that leverages our novel and proprietary STING agonist payload. XMT-two thousand and fifty six targets a novel HER2 epitope, which we believe offer opportunity for development both as a monotherapy and in combination with other therapies, including those that target HER2.

Speaker 2

At SITC 2024 which took place last week, we presented new preclinical data demonstrating XMT-two thousand and fifty six's ability to activate STING signaling and inhibit tumor growth at very low doses. We continue to advance the dose escalation portion of our Phase 1 trial of this candidate. Eligible patients include those with a range of HER2 positive tumors including breast, gastric, colorectal and non small cell lung cancer. And finally, business development remains a core strategic focus for Mersana and we're making further progress in our collaborations with both Johnson and Johnson and Mark Pager. Our efforts in this area were most recently exemplified by the milestones we achieved under these collaborations in the Q3.

Speaker 2

For a little more color on our financials, let's turn things over to Brian.

Speaker 4

Thank you, Marty. Let's begin with our balance sheet. We ended the Q3 with 155 $200,000 in cash, cash equivalents and marketable securities. We continue to expect our capital resources will support our current operating plan commitments into 2026. Please note that our cash runway guidance does not assume any future milestone payments that we may earn from our current collaborations or proceeds that we may realize from future collaborations.

Speaker 4

Net cash used in operating activities for the Q3 of 2024 was $8,600,000 which included the benefit of an $8,000,000 milestone payment and a $3,500,000 payment for manufacturing activities from J and J. Net cash used in Q3 was significantly lower than the $46,100,000 net cash used in operating activities during the year ago quarter. The decrease primarily reflects our portfolio reprioritization efforts, including the OpEx reductions we implemented in the second half of twenty twenty three as part of our restructuring, as well as the payments from J and J. Turning to our income statement. Collaboration revenue for the Q3 of 2024 was $12,600,000 compared to $7,700,000 for the same period in 2023.

Speaker 4

The year over year change was primarily related to the increases in revenue recognized under our J and J and Merck KGA collaboration agreements. Research and development expenses for the Q3 of 2024 declined significantly to $14,800,000 compared to $30,500,000 for the same period in 2023. For the most recent quarter, approximately $2,300,000 of this spending was related to non cash stock based compensation. The year over year decline in R and D expenses was primarily related to reduced costs associated with manufacturing and clinical development activities for our discontinued ADC UPREIT and reduced employee compensation expense following the restructuring we substantially completed in 2023. General and administrative expenses for the Q3 of 2024 declined to $9,900,000 compared to $12,900,000 during the same period in 2023.

Speaker 4

Approximately $1,700,000 in non cash stock based compensation expenses were included in G and A for the most recent quarter. The year over year decline in G and A was primarily related to reduced consulting and professional services fees and reduced employee compensation expenses following our restructuring. And finally, Mersana's net loss for the Q3 of 2024 was $11,500,000 compared to a net loss of $41,700,000 for the same period in 2023. That concludes our business update. Operator, would you please open the call to questions from the audience?

Operator

The first question comes from Tara Bancroft with TD Cowen. Please go ahead.

Speaker 5

Hi, good morning. So thanks for disclosing the nature of the patients a little bit more. It's really helpful to see. So I guess

Speaker 6

what I'm curious about is

Speaker 5

since most patients are post COPO here that you've enrolled, do you have any updated thoughts on how we should benchmark this versus what we've seen from other B7 H4 ADCs, which are not, I mean, besides ASTRA, which of course was not effective there? Thanks so much.

Speaker 7

Good morning, Tara. We're not providing any specific guidance on ORR. We do recognize that there are other benchmarks out there. I mean, Pfizer has shared their data with a 20% response rate at their doses, which we're still trying to understand exactly which doses of those patients or the doses they'll take forward. We've seen the Hanzo data, which, as you recall, was China data.

Speaker 7

So we doubt there was a heavily pre TOPO treatment in those patients. And in the most recent AZ data, they actually while they did show 3 out of 12 patients with breast cancer, none of those patients had seen a prior TOPO. So I think it's those are the benchmarks that are out there, but we think there's non trivial differences between the populations. So, for us to try to get into predicting exactly which one is the right benchmark for us is a little difficult at this point in time.

Speaker 5

Okay. I understand. Thanks so much.

Operator

The next question comes from Jonathan Chang with Leerink Partners. Please go ahead.

Speaker 8

Hi. This is Yander Li on for Jonathan Chang. Thanks for taking my question. So my first question on XMT-sixteen sixty. So how many patients at efficacy evaluable dose are you expecting to see for the initial data update?

Speaker 8

And what is the percentage of them would you consider as biomarker positive? Thank you.

Speaker 9

Yes. Well, good questions there. But actually, we just haven't provided that information to date. That will be shared along with the data later on this year. So we gave the specifics today on the types of patients we've enrolled, some prior treatment, but we haven't gotten into specifics on patient numbers for B7 H4 expression.

Speaker 9

As I think you know, we're enrolling all comers and looking at the B7 H4 data retrospectively, and we do tend to get that information in batches. So even when we share the data, there may be some patients where we don't have complete B7 H4 expression data on, but we'll share what we do have.

Speaker 8

Got it. Thank you. And another follow-up question I have is that you've previously mentioned that you're evaluating the dose schedule that is more frequently than every 4 weeks. So could you provide more insight into how the more frequent dosing cohort is performing relatively to the every 4 week cohort? And, yeah, are you continuing to escalating this more frequent dose as well?

Speaker 8

Thank you.

Speaker 7

Thank you, Jonathan. We're not getting into the details of the dose of the schedule. What we do what I think we have shared is there is this kind of the core schedule that we're on now of every 4 weeks. So that's the one we're up to 115 milligrams per meter squared that we're dosing now. What we're doing on we're looking at more 3 point doses where we split this dose at different intervals in between.

Speaker 7

Today, we're not sharing any data on the relative performance of those 2. We will have, but as we noted during the script, we are going to be sharing some data on is there a dose correlation with activity, etcetera or not. But that will be part of what we described when we share the data set.

Speaker 8

Understood. Thanks for taking my questions.

Speaker 7

Thank you.

Operator

The next question comes from Charles Zhu with LifeSci Capital. Please go ahead.

Speaker 10

Good morning, everyone. Thanks for providing this update and congrats on the progress. My first question, looking at some of the recent Phase 1 clinical readouts for B7 H4ADCs, we've seen median prior lines of therapy ranging from 3 for Pfizer up to 5 for Astra. Can you provide any additional color on what you'd expect your Phase 1 patients to see with respect to prior treatment history number lines beyond the topo ADC experience? And as a similar question as well, looks like you also have a handful of breast cancer patients who are topo naive, almost like an inverse to what AstraZeneca read out at the recent ESMA 2024 conference.

Speaker 10

Can you make any high level commentary regarding what you're seeing in between the topo experience versus your naive patients? Thank you.

Speaker 7

Well, I'll start with the lines of therapy. We're not providing the detailed information. But as Mohan outlined, this is a heavily pretreated population and we will describe that. I think one of the things that will be important and we'll give some kudos to AZ, they actually did call out specifically prior topo exposure in their data set. The others haven't even shown that.

Speaker 7

So I think it's not only number of lines, it's what are those treatments that becomes very important. For example, if a patient was started out hormone receptor positive and got four lines of hormonal therapy, how relevant that is to them now that you're using a cytotoxic in a late line. So, I think it is important to understand kind of the nature of the treatment as well, really specifically have these patients seen ADCs. The second part is an interesting observation. Why aren't we seeing more topo naive?

Speaker 7

And I think one of the things we've heard from investigators, from KOLs and as we're wandering around the halls of ESMO say, how is it that AZ had nobody with topo, prior topo in breast and you guys seem to have a lot. And essentially what we heard is they're voting with their feet. They have they had already based on the retrospective and anecdotal data and their own patient experience decided that they don't want a topo payload after the patient has seen a topo. So one of the things we hear from our investigators and others is they are continuously looking for non topo payloads or novel payloads that they could try in this population. So I think it's not an accident that we're ending up with this patient population.

Speaker 7

It's the investigators telling us we need something different than a topo payload.

Speaker 10

Got it. Great. And also as you continue to push the dose up to and potentially beyond 115 mgs per millimeter squared, is there a scenario where you'd continue dose escalating even as you initiate dose expansions? And can you also talk about potential reasons why you may be able to push the dose so high, maybe specifically around things like payload retention while in circulate lesion for free payload versus intact AADCs? Thank you.

Speaker 7

Well, I mean, I'm going to do the second one first and I'll come back. I mean, our core hypothesis when we design this molecule was to avoid neuropathy, avoid neutropenia, avoid ocular tox. And as you've seen from our previous data with UPRE and 1592, we weren't limited by those toxicities. And so in some ways, the reason we're able to continue to escalate is kind of validates our hypothesis. And Tim, our Chief Tengal Officer, he was right that if you the molecule is designed to avoid those DLTs and it's doing that.

Speaker 7

Now that doesn't mean there's not anything and that will be part of the nature of the data is what do we have and we'll share that with the upcoming safety thing. With regards, could we go beyond 115? That will be driven by the data at this point in time. Does that prevent us from initiating expansion? No.

Speaker 7

We have the way the protocol is designed is we can take in fact, we're probably going to take at least 2 doses into expansion. That's important in the current era of Project OPTIMIS that you kind of get substantial data. So, it would be very easy for us to start with one dose and then come with a second dose later on in the same study. So the direct answer is, if the data allows us to escalate, we would escalate, but that's a data dependent decision. And yes, we can initiate expansion even if we do continue to escalate.

Speaker 10

Great. Thank you for taking our questions and congrats again.

Speaker 6

Thank

Operator

you. The next question comes from Ashik Mubarak with Citi. Please go ahead.

Speaker 9

Hi, guys. Thanks very much for taking my questions and appreciate all the updates here. I just wanted to ask if you have any thoughts as to whether we should expect any differences in effect of XMT 1660 depending on which topo one ADC was used in the prior line. I know triple negative breast is kind of a moving target in between use of in HER2 versus TRODELVI. But is it fair to assume that the majority of patients got at least in HER2 in the prior line?

Speaker 9

And then last question for me. How are you thinking about development in gynecological tumors? Is that still part of the long term plan? Or are you planning to leave that to competitors not focused on topo-one and prior lines? Thanks.

Speaker 7

I'm going to give a

Speaker 6

quick answer, then I'm going

Speaker 7

to turn it over to Mohan to talk about the different types of topo ADC patients receiving and the gynecological development. But the kind of the short answer is, our hypothesis, this is not an antigen difference. So in HER2 versus TRIDELV, even though they're targeting different, ultimately, they inhibit topoisomerase 1. And there are 2 known mechanisms, there's probably more of resistance. One of those, they switch from topo-one to topo-two, but that's for both of them.

Speaker 7

So we would not imagine a difference. The other potential mechanism of resistance is PGP pumps, where basically you get efflux of the payload. As a reminder, our payload is not a substrate for PGP. So no matter which of the mechanisms resistance, which both those molecules are kind of most commonly expected to occur, we should be able to overcome both of those. And I'm going to turn it over to Mohan to address the rest of your question on the population and the gynon development.

Speaker 6

Yes. So I'll maybe kind of start with not talking specifically about our trial, but what's happening in the breast cancer kind of treatment landscape. So I think you can see this from the Gilead kind of earnings call as well. TREDALI is probably the standard of care in chemo pretreated patients in triple negative. They have the bigger market share.

Speaker 6

And some of those patients are also then subsequently treated with NR2, right. But as Marty said, the increasing preference is for physicians to seek alternate payloads and alternate targets. In hormone positive, it's a little bit more kind of split between and I'm talking about what the general kind of treatment pattern is. And sorry, kind of what was the The guide opportunity in guide, Keith? Yes.

Speaker 6

So clearly kind of I will start with endometrial, right. The endometrial kind of secondthird line space is completely open right now because the standard of care is shifting to treatment with both the checkpoint inhibitor and chemotherapy in frontline. And if you don't get kind of checkpoint inhibitor frontline in say an MSS population, they get it second line. But I think in the future, most patients will get both in frontline. And once you get those treatments there, there's really no good treatment option subsequent to that.

Speaker 6

So the opportunity in endometrial cancer is quite big, the unmet need is high and we clearly hear this. In ovarian cancer, clearly there are a lot of treatments in development in platinum resistant, right? But kind of where there is actually kind of an increasing unmet need is in platinum sensitive for either therapies that can combine with platinum and then continue treatment beyond the completion of that platinum therapy. So even though there's kind of lot of treatments competing in the platinum resistance space, there are not that many novel treatments that are being developed in the platinum sensitive space.

Speaker 11

Got it. Thank you for all the color.

Operator

The next question comes from Michael Schmidt with Guggenheim Securities. Please go ahead.

Speaker 12

Hey, good morning. This is Yi Ge on for Michael. Thanks for taking our questions and thanks for the update. Two questions from us. The first one looks like you will first focus on triple negative in the expansion cohort relative to HR positive.

Speaker 12

Wondering is it based on preclinical rationale such as a decent H4 expression or was any clinical observations also part of the consideration? And then I have a follow-up.

Speaker 7

The primary reason we're going there is to be perfectly candid is just unmet medical need. This is where we have the most patients coming into our trial. It's an area where we believe once again, we haven't talked to the agents or anything that the regulatory hurdle will be quite low, because essentially, as Mohan alluded to, once they've seen a topo payload ADC, there is nothing. I mean, the response rate with chemotherapy is 5% and that's in the control arm of Ascent, which was not post TRODELV, that was the same patients getting TRODELV. If you think about post TRODELV, it's certainly no reason to expect that response rate would be higher than 5%.

Speaker 7

So I think, overall,

Speaker 11

this is

Speaker 7

a place for us that we see we could go very fast. We do see hormone receptor positive as an important population. And one thing that's kind of interesting is, if you look at the late line hormone receptor positive breast cancer patients, especially when they get to kind of the HER2 ultra lows, they're starting to look a lot more like TNBC. They're essentially once they've seen that in HER2, there's nothing left for them. So we think those are both opportunities, but TNBC is the cleanest, easiest, fastest.

Speaker 12

Got it. That's very helpful. And then second question, there was a poster at last year's ASCO discussing optimal sequencing of SN38 and DXD-eighty three in breast cancer patients. Just wondering, is there any preclinical rationale or even clinical observation suggesting optimal sequencing of dolacincense and TOP-one ADC?

Speaker 7

I think there's well, we're not really focused on the is there an optimal. We're kind of what we've been focused on is the reality of the clinical situation is we're going to be post topo for the initial indications. So what the focus on data we showed this year at World ADC was showing that we have meaningful activity superior to a topo payload in a cell in preclinical models that had previously been exposed to topo. So we're not I think that's an interesting long term question, should we be in front of the TOPO? But to be perfectly frank, right now today, given that the TOPOs are so well established in the marketplace, our point of entry is going to be post TOPO.

Speaker 7

Or the really cool thing we can think about is assuming we demonstrate the safety profile that we've shown to date with the dulacitin, do you just go with a topo and not even bother about the sequencing, do them together. 2 different targets with 2 different payloads could be a pretty cool thing that others can't do because of either neuropathy, neutropenia, oncotypes or myelosuppression.

Speaker 12

Got it. Very helpful. Thank you.

Operator

The next question comes from Justin Zieland with BTIG. Please go ahead.

Speaker 11

Thanks for taking our question. I wanted to hear your thoughts on what a meaningful delta would be on safety events to differentiate 1660 from the class based on your mechanism of action? And how do you think the differentiated safety profile may enable potential for combination therapy in the future?

Speaker 7

I'm going to start it out and then I'm going to let Mohan kind of talk a little bit about some of the data we generated already in combination with carbo with our previous molecules. One of the things that was a key focus for us is carbo has challenges for myelopascally, there's myelosuppression, but more importantly, when you think about ovarian cancer patients as the best example of this, they've gotten taxanes, they've gotten platinum, they all have neuropathy. And clearly, when you were trying to go into platinum resistant ovarian cancer, if you had a drug that caused more neuropathy, that was very much a limitation. If think about the neutropenia also associated with any type of chemotherapy, so we were very focused on the neuropathy neutropenia. And we were very pleased if you look at the 600 patients with Uprin, which is the same payload, different scalpel linker or with Dolasynthen, our first molecule 1592, which was an APY2B, we really didn't see meaningful neuropathy or neutropenia.

Speaker 7

So we think the bar is really based on that experience with the payload, we think those should be quite low. The other challenge that you see with the topo payloads is the myelosuppression and where you see just kind of pancytopenia type effects. We really if you go back to UPRE and dolacitin, that really wasn't a challenge for us with those molecules. And we think, if you think about it, you can't be giving cytotoxic chemotherapy if your ADC is causing severe myelosuppression. People have tried to do these DAD studies where they combine them and you end up significantly compromising the dose of both ADCs.

Speaker 7

So for us, kind of the Holy Grail is can you give a full dose or a near full dose of the ADC in combination with either another ADC or with another cytotoxic chemotherapy. While we haven't done it with this molecule, I'm going to turn it over to Mohan to talk about we did present some data recently at IGFC where we did combine with CARBO. Mohan?

Speaker 6

Yes. So, with Apri, which was our previous ADC targeting NaPi2b on the Dolaflexin platform, but using the same payload, we did a study called UPREADE where we combined UPRE with carboplatin for 6 cycles and then continued treatment with UPRE. We presented data from the study at IGCS recently and the study really established the ability to combine an ADC with this particular payload that we are using also for 16/60 with carboplatin. So we did not see any exacerbation of neutropenia or neuropathy. There was no increased alopecia.

Speaker 6

So generally a well tolerated profile, but you're able to be dosed for that full sick cycle and then actually beyond the completion of the platinum regimen, right. In addition to kind of the safety, we also saw meaningful activity with a 70 plus percent response rate. So that study really you see as a proof of concept for the potential ability to combine ADCs on this with this particular payload with chemotherapy.

Speaker 11

All makes sense to me. Thanks for taking my question.

Operator

This concludes our question and answer session. I would like to turn the conference back over to CEO, Martin Huber for any closing remarks.

Speaker 7

Thank you, operator, and thanks everyone for dialing in. We'll look forward to speaking with you by the end of the year to review our initial clinical data for XMT-sixteen sixty. That concludes our call, operator.

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