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Edited Transcript of MRSN.OQ earnings conference call or presentation 6-Nov-19 1:00pm GMT

Q3 2019 Mersana Therapeutics Inc Earnings Call

Cambridge Nov 16, 2019 (Thomson StreetEvents) -- Edited Transcript of Mersana Therapeutics Inc earnings conference call or presentation Wednesday, November 6, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anna Protopapas

Mersana Therapeutics, Inc. - President, CEO & Director

* Brian C. DeSchuytner

Mersana Therapeutics, Inc. - SVP of Finance & Product Strategy

* Dirk Huebner

Mersana Therapeutics, Inc. - Chief Medical Officer

* Sarah Carmody

Mersana Therapeutics, Inc. - Executive Director of IR & Corporate Communications

* Timothy B. Lowinger

Mersana Therapeutics, Inc. - Chief Science & Technology Officer

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Conference Call Participants

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* Boris Peaker

Cowen and Company, LLC, Research Division - MD & Senior Research Analyst

* Daniel G. Wolle

JP Morgan Chase & Co, Research Division - Analyst

* Earl DeSouza

H.C. Wainwright & Co, LLC, Research Division - Associate

* Michael Eric Ulz

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Wei Ji Chang

SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to Mersana Therapeutics' Third Quarter 2019 Conference Call. (Operator Instructions) I would now like to turn the call over to Sarah Carmody, Executive Director Investor Relations and Corporate Communications. Please proceed.

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Sarah Carmody, Mersana Therapeutics, Inc. - Executive Director of IR & Corporate Communications [2]

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Good morning. Welcome to Mersana's Third Quarter 2019 Conference Call. We issued a press release earlier this morning reviewing our third quarter 2019 results and business updates, which will be covered on this call.

A replay of today's call will be available on the Investor and Media section of our website. After our prepared remarks, we will open the call for Q&A.

Before we begin, I'd like to mention that our call will contain forward-looking statements within the meaning of federal securities laws. These are not statements of historical facts and are based on management's beliefs and assumptions and on information currently available. They are subject to risks and uncertainties that could cause the actual results and the implementation of the company's plans to vary materially, including the risk that our early encouraging preclinical results for XMT-1536 are not necessarily predictive of the results of our ongoing or future discovery programs or clinical studies; that the development and identification of the company's product candidates and new platforms will take longer and/or cost more than planned; and that our clinical trials will not be completed on schedule, if at all. These risks are discussed in the company's SEC filings, including, without limitation, the company's annual report on Form 10-K filed on March 28, 2018 and subsequent filings. Except as required by law, the company assumes no obligation to update these forward-looking statements publicly, even if new information becomes available in the future.

And with that, I'll turn the call over to Anna Protopapas, Mersana's Chief Executive Officer.

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [3]

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Thank you, Sarah. Good morning, everyone, and welcome to our financial and corporate update call for the third quarter of 2019. Joining me today with prepared remarks are Dirk Huebner, our Chief Medical Officer; Tim Lowinger, our Chief Scientific and Technology Officer; and Brian DeSchuytner, our Senior VP of Finance and Product Strategy.

We're also joined by Eva Jack, our Chief Business Officer; and Michael Kaufman, our Senior VP of CMC, who will be available for questions. As a reminder, we presented Phase I interim dose escalation data for XMT-1536, our first-in-class and wholly-owned Dolaflexin ADC-targeting Napi2b at ASCO this year. This data showed encouraging clinical activity and durable responses and prolonged stable disease at well-tolerated doses in unselected and heavily pre-treated patients.

We are now executing on a set of goals that positions Mersana for a data-rich 2020 and near-term proof of concept and are funded to deliver on these important data readouts.

More specifically, in the third quarter we initiated 2 expansion cohorts in patients with platinum-resistant ovarian and lung adenocarcinoma cancers at 36 milligrams per meter square, a dose we have determined is efficacious and well tolerated. We have strong investigator interest and are rapidly bringing up new sites for the expansion cohort enrollment. In parallel, we have continued to evaluate higher doses. 3 patients have been dosed at 43 milligrams per meter square without experiencing dose-limiting toxicities.

So overall, we're encouraged with the continued safety and efficacy profile of XMT-1536. We are on track for achieving proof-of-concept in multiple data readouts in 2020. It should be a very exciting year for Mersana. Dirk will provide more detail on our progress on XMT-1536.

In terms of our earlier pipeline, we have advanced our next ADCs through IND-enabling studies and are on track to announce around year end and file the IND in the first half of 2020. Our data to date continued to support the differentiated profile of this ADC and its potential to benefit patients.

We're also continuing to strengthen our discovery pipeline, leveraging our Dolaflexin, Dolasynthen and Immunosynthen platforms. These innovative platforms provide a highly efficient product engine that allows us to build a robust discovery pipeline that will fuel our mid- to long-term growth. We recently presented data on our Immunosynthen programs for the first time at World ADC in October, and we will be presenting additional data at the Society for Immunotherapy of Cancer this week. Tim will provide more detail on our progress.

With that, I will now turn the call over to Dirk to provide an update on XMT-1536.

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Dirk Huebner, Mersana Therapeutics, Inc. - Chief Medical Officer [4]

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Thanks, Anna, and good morning, everyone. Today, I will provide an update on our ongoing clinical study of XMT-1536 in patients with platinum-resistant ovarian cancer and NSCLC adenocarcinoma.

I'll begin with the ongoing XMT-1536 expansion study. In August, we announced that we dosed our first patient in the expansion study. As a reminder, the ongoing expansion study is evaluating XMT-1536 at 36 milligram per square meter once every 4 weeks in patients with platinum-resistant ovarian cancer and NSCLC adenocarcinoma. We are currently enrolling platinum-resistant ovarian cancer patients who have had no more than 3 lines of therapy and NSCLC adenocarcinoma patients who have failed one prior line of platinum-based chemotherapy, either in combination or sequentially treated with an anti-PD-1 or anti PD-L1 monoclonal antibody.

We are also enrolling patients with oncogenic driver mutations, such as EGFR or ALK mutations, who have had prior lines of targeted therapies and no more than one line of chemotherapy. We expect to enroll approximately 45 patients in each cohort. We are pleased with the investigator interest in the trial. To date, we have initiated 20 sites and additional sites will be coming online in November and December. We expect to be able to provide multiple data readouts during 2020. These disclosures could include data from both the platinum-resistant ovarian cancer and NSCLC adenocarcinoma patient cohorts.

I now turn to the status of the XMT-1536 dose escalation study. As Anna mentioned, we initiated a 43 milligram per square meter once every 4-week cohort in August. The safety review committee has evaluated 3 patients on the 43-milligram per square meter dose level and concluded that no patients experienced dose-limiting toxicities and that the dose has been well tolerated to date.

So far, we have seen an encouraging safety profile at this dose level without the severe treatment-related AEs, typically associated with other ADC platforms, such as neutropenia, neuropathy and ocular toxicity. We are pleased with the continued positive profile of XMT-1536 and plan to enroll more patients at this dose level to gain additional experience. As we have said in the past, our drug -- our objective is to optimize efficacy, while maintaining a good tolerability profile. It is also important to point out that we have patients treated at 20, 30, 36 and 43 milligram per square meter in the dose escalation that are still on treatment, allowing us to continue to evaluate the overall long-term profile of XMT-1536. We expect to report the data in 2020 at the completion of the dose escalation study.

In closing, we continue to make great progress in the clinical development of 1536 and look forward to sharing further data from the expansion and the dose escalation portions of this study in 2020.

I will now turn the call over to Tim Lowinger, our Chief Science and Technology Officer to discuss the preclinical and next-generation ADC platform work.

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Timothy B. Lowinger, Mersana Therapeutics, Inc. - Chief Science & Technology Officer [5]

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Thanks, Dirk. I'd like to start by highlighting a co-authored poster on NaPi2b expression in non-small cell lung cancer, which was presented a few weeks back at the AACR-NCI-EORTC International Conference on Molecular Targets and Cancer Therapeutics or the so-called triple meeting in Boston. We worked with an academic collaborator to analyze a large sample of well-annotated lung tissues to investigate NaPi2b expression in NSCLC, emphasizing correlations to histology and have determined that NaPi2b is broadly expressed in lung adenocarcinoma.

The study demonstrated that in this large, early stage surgical non-small cell lung cancer cohort, a high level of NaPi2b expression was seen with adenocarcinoma histology and across the range of adenocarcinoma subtypes. In addition, patients with EGFR or KRAS mutations also were found to have high expression of NaPi2b. For adenocarcinoma cases, 80% of patients with EGFR mutations and 75% of patients with KRAS mutations were also found to have high expression of NaPi2b. We believe these findings further support our decision to evaluate XMT-1536 in non-small cell lung cancer adenocarcinoma patients in our ongoing expansion study.

You can find a copy of the poster on our website. Turning to our next ADC, we remain on track to disclose the details around the end of the year and file an IND in the first half of 2020. We're excited about the differentiated profile of this ADC and its potential to benefit patients. In addition, we have made important progress in advancing our proprietary immunostimulatory platform and pipeline. We presented preclinical Immunosynthen data at the World ADC Conference in October.

As a reminder, Immunosynthen is designed to deliver a novel STING agonist safely and efficiently to the tumor and stimulate an antitumor innate immune response. At World ADC in October, we showed that our STING agonist ADC results in more than 100-fold increase in in-vitro and in-vivo potency compared to free payload; that it causes complete regression of tumors in-vivo after a single, well-tolerated dose; and that it increases immune cell infiltration and cytokine expression profile within the tumor after dosing.

In addition to this data, we plan to show further in-vitro and in-vivo preclinical data at the 2019 Society for Immunotherapy of Cancer Conference on November 8. The poster abstract went live yesterday on the SITC website, and the poster will be available on our website following the SITC poster session.

In closing with Dolaflexin, Dolasynthen and our Immunosynthen platform, we have built a powerful set of ADC platforms that allow us to efficiently generate a robust pipeline of ADCs for multiple targets and indications and address a broad set of patient needs.

And with that, I will turn the call over to Brian DeSchuytner, Mersana's Senior Vice President Finance and Product Strategy.

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Brian C. DeSchuytner, Mersana Therapeutics, Inc. - SVP of Finance & Product Strategy [6]

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Thank you, Tim. Good morning, everyone, and thank you for joining us today. Before I discuss our third quarter financial results, I'd like to take a moment to highlight a few key takeaways from ESMO and the potential impact for XMT-1536 in platinum-resistant ovarian cancer. The data presented at ESMO this year on ovarian cancer signaled the potential for a real paradigm shift in the standard of care for first-line ovarian cancer. We learned that targeted therapies, specifically bevacizumab and PARP inhibitors approved in platinum-resistant ovarian cancer, are likely they be used in earlier lines of therapy.

In addition, PARP inhibitors previously primarily used in BRCA-positive tumors may be used more broadly against tumors that have homologous recombination deficiency or HRD positivity. All of this taken together means targeted therapies will be exhausted earlier for more patients and increases the need for new mechanisms of action in later line and in platinum-resistant patients. Based on our discussions with investigators and the emerging profile of XMT-1536, there is substantial interest in pursuing accelerated registration strategies. With regard to lung cancer, data released at ESMO and also at the World Lung Cancer Conference reinforced that despite advances in the front line standard of care, there remains substantial unmet needs for patients with relapsed disease who have already been treated with PD-1 or PD-L1 in chemotherapy.

We continue to work with investigators to assess XMT-1536 in this study. Now let me turn to our third quarter financial results, and I'll start with our cash position. We ended the third quarter of 2019 with $112 million in cash, cash equivalents and marketable securities. We used net cash of $16.3 million in operations in the third quarter of 2019, and we expect our cash position will fund our operating plans through several key clinical milestones with cash into at least mid-2021.

In addition, we had the option to draw additional advances of up to $15 million through the debt financing agreement for Silicon Valley Bank, which we completed in May of 2019. And now some of the key highlights from our third quarter 2019 financial results. Collaboration revenue for the third quarter of 2019 was approximately $0.8 million compared to $2.2 million for the same period in 2018. The decrease in collaboration revenue was primarily a result of decrease in services performed in support of our partners' programs. Research and development expenses for the third quarter of 2019 were approximately $13.7 million compared to $15.2 million for the same period in 2018, driven primarily by a decrease in manufacturing costs for XMT-1536 and XMT-1522. This was offset by: one, an increase in manufacturing costs associated with the company's next ADC clinical candidate; two, the advancement of companion diagnostic development efforts for XMT-1536; and three, the payment of a milestone related to the expansion cohort initiation.

General and administrative expenses for the third quarter of 2019 were flat compared to the same period in 2018 at $4.4 million. Net loss for the third quarter of 2019 was $16.8 million or $0.35 per share compared to a net loss of $17.1 million or $0.74 per share for the same period in 2018. Weighted average common shares outstanding for the quarters ended September 30, 2019, and September 30, 2018, were approximately $48 million and $23 million, respectively.

I'll now turn the call back to Ann.

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [7]

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Thank you, Brian. We have made tremendous progress in the clinical development of XMT-1536, the advancement of our next clinical candidate and the strengthening of our discovery pipeline. This work well positions Mersana for a data-rich 2020 with multiple potential inflection points throughout the year. For example, in 2020 we are targeting to report, first, the data from the full dose escalation portion of the 1536 study; secondly, the early data from the ovarian and lung cohorts in the XMT-1536 dose expansion study; and thirdly, a more mature set of data from both of those expansion cohorts.

In addition, we plan to file an IND and enter the clinic with our next ADC candidate in the first half of 2020 as well as disclose additional information on our next molecules to enter preclinical studies. We're planning to provide more specific guidance in terms of timing of all these goals early next year.

Lastly, as Brian mentioned, with a cash balance of $112 million, we believe we are well capitalized to execute and drive our programs towards meaningful data readouts next year and into at least mid-2021. It's a really exciting time at Mersana as we get closer to our goal of bringing XMT-1536 to patients.

I look forward to continuing to update you on our progress. We'll now open the call to Q&A.

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Questions and Answers

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Operator [1]

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

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Wei Ji Chang, SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst [2]

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First question on the 43-mg per meter square dose. Why would you need to see to consider either dose escalating beyond that or using that as the go-forward dose for the expansion cohorts?

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Dirk Huebner, Mersana Therapeutics, Inc. - Chief Medical Officer [3]

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Yes, this is Dirk. So I can take this question. So first of all, we're seeing a very nice safety and tolerability profile at the 43 milligram per square meter in the first 3 patients. I want to point out here that we haven't seen a DLT, we have only seen a grade 1, grade 2 toxicities so far. And even more important, we haven't seen the severe treatment-related AEs that are typically associated with other ADC platforms, such as neutropenia and neuropathy and ocular toxicity. So keeping our objectives in mind, which is to optimize efficacy and maintaining a good tolerability profile that is also suitable for long-term dosing. So there are basically 2 questions that we need to address. So first would be how much further can we dose escalate? And the second would be at which point are we going to switch the dose? So at this stage, we want to enroll further patients, and this will help us to answer those questions. We have identified those already, and we're planning to do another 3, and we believe this is going to go relatively quickly. And again, whatever we're going to find then, this is going to drive our decision, but at the moment we feel very comfortable with what we're seeing at 43 milligram.

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Wei Ji Chang, SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst [4]

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Got it. And just operationally speaking, what are the considerations for changing the expansion cohort dosing?

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [5]

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It -- Jonathan, I think the switch is fairly simple. It would require an amendment to the protocol, which would be quite simple, and that's a benefit of having these sites up and running and continuing to add additional sites.

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Wei Ji Chang, SVB Leerink LLC, Research Division - MD of Emerging Oncology & Senior Research Analyst [6]

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Got it. Just one last one for me. Are you willing to provide any more color today on when we might see the next data update on the 1536 study? And in that next update, should we expect data from both the escalation and expansion portions at the same event? Or is this more likely to be staggered where we'll first see, I guess the escalation data?

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [7]

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I think I'll -- I -- as we've said, we're really gearing up for a very data-rich 2020, it will include disclosure of the full escalation data, it will include disclosures on both expansion cohorts early data and more mature data. The exact timing of it and the forum we will disclose this, I think we need some more time before we are ready to give that specific guidance, Jonathan. But we know it will be coming in the near term as we move these programs -- these studies forward.

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Operator [8]

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Our next question comes from Debjit Chattopadhyay from H.C. Wainwright.

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Earl DeSouza, H.C. Wainwright & Co, LLC, Research Division - Associate [9]

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This is Earl DeSouza in for Debjit. So just a few questions on our end. First, what has been the general experience at the 30 and 36 mg square meter cohorts? And has there been additional responses beyond what has been disclosed?

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Dirk Huebner, Mersana Therapeutics, Inc. - Chief Medical Officer [10]

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So the experience so far has been very positive and promising on the 30- and 36-milligram cohort. As we disclosed publicly with our poster at ASCO, we have treated a number of patients on both of those dose levels -- sorry, the 36, not about the 30. And what we see there is that patients stay on study for extended periods of time, and we have seen efficacy in doses between 20 and up. So the 30 milligram -- and if you look at the poster, we saw 2 responders at the 30-milligram per square meter dose cohorts. So we are definitely in an efficacious range here. And so far, 30, 36 milligram has been well tolerated. We feel very comfortable moving this forward in the current expansion study.

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Earl DeSouza, H.C. Wainwright & Co, LLC, Research Division - Associate [11]

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And the responses to date, have they been durable above 4 months?

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [12]

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I think we are -- yes, I will point you to the ASCO poster as the last data disclosure we have made. And obviously, as I mentioned earlier, we will be disclosing the full dose escalation dataset as well as the expansion dataset in 2020.

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Earl DeSouza, H.C. Wainwright & Co, LLC, Research Division - Associate [13]

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Okay. And the final one. What are your thoughts on the diagnostic and utilization in an ongoing expansion cohort?

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [14]

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We have developed a diagnostic that we think is a very robust diagnostic. We've validated that in a GLP lab. It's being used in the expansion cohorts, where we are collecting both archival tissue, and where medically feasible, fresh tissue. So we are in the -- we are collecting this data, we have an assay that we've demonstrated has a broad dynamic range to really be able to distinguish low expressions -- expressers, medium expressers and high expressers. And in fact, we've already engaged with a commercial vendor, so we will be able to have what could be a commercially available diagnostic to develop in association with the registration-enabling study.

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Operator [15]

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Our next question comes from Boris Peaker from Cowen.

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Boris Peaker, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [16]

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Another one on 1536. I'm just curious, as you're exploring several doses, do you have any data to show how the actual payload delivery correlates with dosing? Is it linear or perhaps follows a more complex pharmacodynamic relationship?

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Dirk Huebner, Mersana Therapeutics, Inc. - Chief Medical Officer [17]

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Yes. The pharmacokinetic profile is dose-proportional. We also presented that at the poster at ASCO across a range of doses from 3 milligram all the way up to 30 milligrams. And so the exposure is dose-proportional. We don't see accumulation in the current setting over 3 weeks or 4 weeks. So there's -- the drug behaves like a very promising profile in terms of pharmacokinetic and reliability of exposure.

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Boris Peaker, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [18]

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Got you. And just -- I want to clarify on maybe some of the prior questions. So do you have any plans at this point to go above the 43-mg dose? Or is the plan just to enroll more patients in 43 and then decide if higher doses are even needed?

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [19]

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Data is really going to drive where we go. I think both. I think the option to go higher is there, and we're just going to let data drive the decision-making. And I think as Dirk indicated, we're encouraged with the continued profile of the drug. So...

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Boris Peaker, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [20]

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Got you. And lastly, do you see anybody else besides you guys working on this target?

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [21]

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We are not aware of anyone else working on this target.

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Operator [22]

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(Operator Instructions) And our next question comes from Jessica Fye from JPMorgan.

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Daniel G. Wolle, JP Morgan Chase & Co, Research Division - Analyst [23]

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This is Daniel for Jessica Fye. With the 43-milligram dose level, I realize you do not hit DLT, but did you see any transient liver enzyme elevations?

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [24]

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We have seen a profile that is very consistent with what we presented at ASCO, grade 1 and grade 2 toxicities. They are primarily fatigue, nausea and transient AST elevations that are not associated with changes to the other liver enzymes. So a very consistent profile, very well tolerated, really looks very much like what we presented at ASCO.

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Dirk Huebner, Mersana Therapeutics, Inc. - Chief Medical Officer [25]

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And then to add on those toxicities were only grade 1 and grade 2, we didn't have any grade 3 toxicity on those first 3 patients.

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Daniel G. Wolle, JP Morgan Chase & Co, Research Division - Analyst [26]

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Got it. And then for the dose escalation study, how long have the patients been dosed at 43 milligram?

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [27]

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Well, I think we said on the script that we dosed the first patient at 43 mg in August.

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Daniel G. Wolle, JP Morgan Chase & Co, Research Division - Analyst [28]

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And then last, besides safety, can you speak qualitatively to the activity you're seeing at this higher doses in the dose escalation data?

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [29]

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Obviously, it's early, but I can tell you that we continue to be encouraged with the profile of the drug. We're seeing activity at well-tolerated doses.

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Operator [30]

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Our next question comes from Mike Ulz from Baird.

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Michael Eric Ulz, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [31]

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Great. So just with respect to the expansion study, can you maybe talk about the pace of enrollment here? And maybe what you're seeing in both the ovarian and lung cancer cohorts? And maybe how those are at tracking versus your expectations?

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Dirk Huebner, Mersana Therapeutics, Inc. - Chief Medical Officer [32]

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Yes. Yes. So first of all, we are very pleased with the number of sites that we were able to initiate. We are ahead of schedule, ahead of plan, and that's mostly due to investigator enthusiasm on the study. And the number of sites and also enrollment is increasing, basically on a daily basis, and we're going to provide more update as we get closer to the completion of the cohort. But at the moment, I can tell you it's going very well.

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Operator [33]

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Thank you. And I am showing no further questions from our phone lines. I'd now like to turn the conference back over to Anna Protopapas for any closing remarks.

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Anna Protopapas, Mersana Therapeutics, Inc. - President, CEO & Director [34]

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Well, thank you for really listening in and continued interest in Mersana. We have a lot going on, and we are looking forward to a very data-rich 2020. And we look forward to giving you an update on our progress. Thank you.

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Operator [35]

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Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. You may all disconnect. Everyone, have a wonderful day.