Q4 2023 Mersana Therapeutics Inc Earnings Call
Participants
Jason Fredette; SVP, IR and Corporate Communications; Mersana Therapeutics Inc
Marty Huber; President and CEO; Mersana Therapeutics Inc
Brian DeSchuytner; SVP, COO and CFO; Mersana Therapeutics Inc
Tara Bancroft; Analyst; TD Cowen
Jonathan Chang; Analyst; Leerink Partners
Ashiq Mubarack; Analyst; Citi
Colin Sebastian; Senior Research Analyst, Senior Research Analyst, Internet / Interactive Entertainment; Robert W. Baird & Co Inc
Kaveri Pohlman; Analyst; BTIG
Michael Schmidt; Analyst; Guggenheim Securities
Asthika Goonewardene; Analyst; Truist Securities
Brian Cheng; Analyst; JPMorgan
Presentation
Operator
Good morning, and welcome to the Mersana Therapeutics fourth-quarter 2023 conference call and webcast. (Operator Instructions) Please note this call is being recorded.
I would now like to turn the call over to Jason Fredette, Senior Vice President, Investor Relations and Corporate Communications.
Jason Fredette
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. And these statements may include but are not limited to, those relating to our platforms, product candidates, business strategy, clinical trial execution and results, 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 November 7, 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 Chief Executive Officer, Dr. Martin Huber; and our Chief Operating Officer and Chief Financial Officer, Brian DeSchuytner.
With that, let me turn the call over to Marty to begin our discussion.
Marty Huber
Thank you, Jason, and good morning, everyone. It's great to be speaking with you again. Let's start today's call off with a brief description of our high-level aim here at Monsanto. Although ADCs have firmly established a position at the forefront of oncology, there are significant platform and payload limitations that we believe are preventing this therapeutic class from realizing its full potential at Mersana, we're focused on bringing forward innovations to address these limitations to meaningfully improve the efficacy and safety of ADCs. Our goals are first to minimize dose-limiting platform toxicities. We believe the achievement of this goal could allow us to maximize the monotherapy potential of cytotoxic ADCs and also allow them to be used effectively in combination with other standard of care treatments, something that simply isn't possible with many of today's ADCs.
Second, we aim to avoid resistance mechanisms that appear to be hampering certain ADCs. And third, we're striving to extend the field well beyond cytotoxics and establish an entirely new class of ADC therapies that elicit a targeted innate immune response to combat cancer with that as a backdrop, let's turn our attention to the progress we're making in accomplishing these objectives. And let's begin with our proprietary auristatin payload that's being used in our next generation cytotoxic ADC platform solutions. And when we developed this payload, one of our core objectives was to avoid the dose-limiting neutropenia and peripheral neuropathy that is reported with ADCs based on the VCMMAE. platform and other first-generation ADC platforms. Our payload has controlled bystander effect, meaning that it initially is membrane permeable and capable of bystander killing. However, it has also been designed to be enzymatically converted to an active metabolite that has much less membrane permeable, resulting in its accumulation in the tumor and avoidance of off-target toxicity. While we view our payload as a core differentiator and advantage. The same can be said for the platform we're using to deliver that payload Dolasynthen. We have presented extensive preclinical data in the past demonstrating important advantages are Dolasynthen ADCs against ADCs produced using our own first-generation platform. Dolaflexin and other platforms like DCMMAY. 2024 provides us with the opportunity to begin presenting the clinical data next week in Barcelona at the European Society of Gynecological Oncology, otherwise known as SCO. clinical data will be presented for two discontinued product candidates, uprate and XMT 1592. Both of these candidates utilize the same NaPi2b antibody and the same proprietary payload with controlled bystander effect. However, upgrade was developed using Dolaflexin at 1592 was developed with Dolasynthen. We believe these clinical data help to affirm that the severe neutropenia, peripheral neuropathy and ocular toxicity that is frequently observed in trials of ADCs based on other platforms and payloads are uncommon with our payloads. We also believe they clearly show that Dolasynthen further reduces platform toxicities compared with Dolaflexin Following these presentations in mid 2024, we plan to share our initial clinical data for XMT 1660, our B7-H4 targeting Dolasynthen ADC. We continue to be pleased with the progress we're making in our Phase one trial evaluating the safety and tolerability of XMT 1660 as a single agent in patients with solid tumors, including triple negative and estrogen receptor positive breast cancer as well as ovarian and endometrial cancer. The dose escalation portion of the trial is ongoing. In fact, we just recently escalated to a dose of 59 milligrams per meter squared, which is the highest dose that we have investigated clinically with $1.7 ADC, a maximum tolerated dose for XMT 1660 still has not been established in addition to continuing escalating dose. We are also continuing to enroll patients in backfill cohorts to optimize dose and schedule. As is typical for Phase one, we're enrolling a heavily pretreated patient population today, single agent chemotherapy is the standard of care for these types of patients and their prognosis is exceedingly poor. For instance, the objective response rate in late-stage triple-negative breast cancer is estimated to be approximately 5% or less with a duration of response that is less than four months today, most breast or breast cancer patients here in the US are receiving in HER2 and Trodelvy early in their treatment. An increasing amount of data is emerging that shows patients are developing resistance following their first topo one ADC treatment. These factors are presenting an urgent unmet need for new ADCs with alternative payloads that do not share these resistance mechanisms. We are enrolling many patients who have previously received at least one of these type of ADCs in our Phase one clinical trial, and we're looking forward to sharing initial data midyear. So we can begin to clinically characterized XMT 1660 efficacy and safety profile.
Now while we're very excited about XMT 16, 60 and Dolasynthen. We believe IO may be the next significant frontier for ADCs. Our Immunosynthen platform is designed to harness the power of STING and overcome the historic limitations of three systemic STING agonist and intra-tumoral injections. This platform has the potential to deliver a targeted and impactful one-two punch by activating STING in a target dependent manner in tumor cells and tumor resident myeloid and dendritic cells, while also minimizing the risk of systemic exposure.
Xmt 2056 is our lead Immunosynthen ADC. We're currently in the process of restarting our Phase one trial of this HER2 targeting ADC following a lift of the clinical hold on this trial by the FDA in the fourth quarter of 2023. In Phase one, we plan to enroll patients with a range of different HER2-positive tumors, including breast, gastric, colorectal and non-small cell lung cancer. And we're looking forward to advancing dose escalation in 2024.
In addition to our independent programs over the past two years, we also have entered into collaboration agreements with Johnson & Johnson, Merck KGA and GSK. We remain very much engaged with these companies as we seek to maximize the potential of our ADC platforms and product candidates.
So in summary, Mersana entered 2024 with energy and excitement. We have two differentiated ADC platforms, platforms that we think could address significant limitations for today's ADCs. We also have two differentiated clinical-stage assets at upcoming data readout on XMT 16, 60 and a strong balance sheet.
On this latter point, let me turn the call over to our Chief Operating and Financial Officer, Brian, to share to share more detail.
Brian DeSchuytner
Thank you, Marty. Let's begin with the financial highlights for the fourth quarter of 2023. We ended the year with approximately $209 million in cash, cash equivalents and marketable securities net cash used in operating activities was approximately $32 million for the fourth quarter of 2023, which is down significantly from prior quarters. Thanks to our restructuring and upgrade wind-down efforts. From a cash expenditure standpoint, we can expect to continue realizing benefits from these efforts in 2024. As a result, our capital resources are expected to be sufficient to support our current operating plan commitments into 2026. Please note that our cash runway guidance does not assume any potential milestone payments from our current collaborations or proceeds that we may realize from future collaborations.
Turning to the income statement, collaboration revenue for the fourth quarter of 2023 was $10.7 million compared to $14.7 million for the same period in 2022. Year over year change was primarily related to the timing of research activities for the Johnson & Johnson collaboration and achievement of a Johnson & Johnson early development milestone in the fourth quarter of 2022.
Research and development expenses for the fourth quarter of 2023 were $21.5 million compared to $45.7 million for the same period in 2022, approximately $2.2 million in noncash stock-based compensation expenses and $3.7 million of external costs related to our upgrade wind-down efforts were included in the R&D line in the most recent quarter year over year. Decline in R&D was primarily related to reduced manufacturing and clinical costs related to upgrade and XMT 2056 and reduced employee compensation costs, partially offset by increased clinical costs related to XMT 16, 60 general and administrative expenses for the fourth quarter of 2023 were $10.1 million compared to $14.8 million during the same period in 2020 to approximately $1.9 million in non-cash stock-based compensation expenses were included in G&A for the most recent quarter year over year decline in G&A expenses was primarily related to reduced consulting and professional fees and reduced employee compensation as a result of the restructuring plan we announced in July 2023. Monsanto's net loss for the fourth quarter of 2023 was $19.5 million compared to a net loss of $44.9 million for the same period in 2022.
That concludes our business update. Operator, would you please open the call to questions from the audio.
Question and Answer Session
Operator
(Operator Instructions) Tara Bancroft, TD Cowen.
Tara Bancroft
Hi, good morning. So maybe you could go into specific expectations for the midyear 1660 update and specifically given the 1592 data that are coming next month, what takeaways can we use from that to take forward and increase our confidence in the 1660 data are based on the new platform technology.
Jason Fredette
Thanks, Tara. So this is Jason. I'll start that the midyear data will be efficacy and safety, tolerability data. We haven't specified exactly what we'll show just yet, but mid-year is the guidance, as you noted, and maybe I'll turn it over to Marty for the second part of the question and just so I make sure I'm answering your question.
Marty Huber
As I understand it is what can we learn from the Asco dataset on 1592. I think as we had noted, it was it's the same NaPi2b antibody, the same payload. The only difference is the scaffold, the Dolaflexin versus the data center and what we will show is the safety data from 1592 demonstrates what we would expect to see with our platform related effects and what we observed or will show in the data is that one, we continue to show an absence of peripheral neuropathy, absence of neutropenia, absence of ocular toxicity. But in addition, we plan to show the that the data with 1592. The dollar scented also has lower risk of some of the other platform toxicities that were observed with upgrades. And those details, we'll be apparent between the two presentations. Is that.
Tara Bancroft
Okay. Thank you.
Operator
Jonathan Chang, Leerink Partners.
Jonathan Chang
Hi, guys. Good morning. Thanks for taking my questions. First, question. Can you just remind us on the decision making process behind what happened with the second gen NaPi2b program? And then just following up on the previous question, what the lessons there could be for the ongoing B7-H4 program?
And a second question, can you provide any color on how enrollment has progressed on the B7-H4 study and where you are in dose optimization. Thank you.
Jason Fredette
Thank you, Jonathan. That it sounds like three questions, but we'll take them at in turn. So with respect to 1592, the original premise for that program was in lung cancer. And over the course of our explorations in lung cancer, we came to realize that the prevalence of the biomarker is much lower in lung cancer than was reported by the literature and was reported in ovarian cancer as well. And so that very much given our cost of capital and the other opportunities available to us in our portfolio what drove the decisions around strategic reprioritization for 1592. And I think I'll pass it to Marty with respect to the 66 crores.
Marty Huber
And with regards to the learnings from B. seven H. four. One of the important observations from both 1536 and 50 92 is that there was it was pneumonitis that we believe is associated with the presence of NaPi2b on tied to numerous sites that are in the lung. And one of the things we've learned as we look at B7-H4, there is not that same level of expression or any expression on the tumor sites for B7-H4. And one of the reasons we were pleased to see the data from as well as for it from Seagen and from 10. So at both the last data set that showed no evidence of target mediated toxicity. So I think an important learning for us is that for the pneumonitis that we observed with that, B2B is most likely on target, and we look forward to our dataset in 1616.
With regards to your enrollment question, I think we've we've essentially now escalated beyond Dose Level six, we are now at 59 no gas meter squared. We are continuing to enroll in the backfills. As we've noted, it's up to 12 patients are in these backfills at dose levels.
I think the other thing we highlighted that we are looking at potential Q. three as well, alternative Q4 schedules. And so we remain we believe we're continuing to optimize dose and schedule for 1660.
Jonathan Chang
Got it. Thank you.
Operator
Ashiq Mubarack, Citi.
Ashiq Mubarack
Hi, guys. Thanks for taking my questions and congrats on the progress. I guess a couple from me. You said you're starting expansion cohorts for XMT 16, 60 in the second quarter. I guess when those cohorts get up and running, will you share which specific tumor types are being moved into expansion phase? And also at that point, lose share what the go-forward dose will be or will we need to wait for those details at the midyear data update?
Jason Fredette
Yes, good questions. We haven't predefined that I would say on. So, you know, stay tuned on that front. We're operating in a competitive environment in the B. seven H. four space. So TBD on that.
Ashiq Mubarack
Okay, understood. And then maybe one more on 2056. It sounds like you're getting that study up and running again. But I'm just wondering what the gating factors to getting dosing going or am I misunderstanding that that's already happened?
Marty Huber
We're taking the steps required to get the trial back underway as soon as possible. This includes reengaging with our trial sites. So it's the internal process from IRB, but also when we changed the dose and made some other adjustments that was a protocol amendment. And then that has knock-on effects on databases and CROs, et cetera. So we're it's kind of the normal logistical stuff associated with a study restart those are underway.
Ashiq Mubarack
That's very helpful. Thanks very much.
Operator
(Operator Instructions) Colin Sebastian, Baird.
Colin Sebastian
Hi, good morning. Thanks for taking our questions. Can you remind us how you're dealing with the B. seven H. four biomarker in the Phase one two dose escalation? Are you measuring it at baseline but not pre selecting patients?
Jason Fredette
And then would we expect any of the biomarker data in the midyear update up at this morning at this point in time, we are gathering data pretreatment on B7-H4 expression. However, we are not using that to select for patients. Patients are enrolled regardless of the outcome of the test with regards to data display. As Jason noted, we are in a highly competitive environment of note, neither Pfizer nor Hansel shared their biomarker data. And so we will have to make a judgment call at the video data presentation, will we or will we not share that data.
Colin Sebastian
Great. That's helpful. Thank you. And then on 2056, what about the GSK at this point and kind of restarting the study?
Marty Huber
Well, maybe I'll take that. So the product is have an option with GSK, as you will recall, and they have not exercised that option. And so we retain some decision-making control over what we do in that product. But that said, GSK very engaged in the process. We're very pleased with the partner.
Colin Sebastian
Great. Thanks for taking my question.
Operator
Kaveri Pohlman, BTIG.
Kaveri Pohlman
And this is Christian. I'm on for Gary today. So actually, the previous question answered parts of what I was wondering, but on for the Phase one trial for 1660, how much overlap do you expect to see between B7-H4 and some of the other ADC targets such as stroke to folate receptor alpha online CDH six.
And my second question for the STING ADC, could you tell us how you're thinking about when is the 56 potentially fitting into the current treatment landscape?
Marty Huber
Is it mostly going to be a combination drug, but as Marty with regards to 1660, while we don't have detailed data on that yet. One thing we do know is there's a trend for B7-H4 and PD-L1 on the tumor to not be overlapping. The Venn diagram of those two population tends to be fairly separate with regards to folate receptor alpha do not have any specific data available at this point in time, and I wouldn't want to speculate on that, but there is no we're not a we're not aware of any overlap in biology between the two targets.
But as far as specific data that says whether the populations lack overlap or not, I can't give you that answer today when you allocate charges that have And with regards to the same, we are certainly thinking in terms of combinations for 2056, we think one of the advantages of having a locally tumor directed STING agonist is that that would allow you to do combinations with other systemic treatments? For example, you could get potentially an anti-PD-1 in a setting where you normally would not be able to cause systemic STING activation combined with the PD-1 would just be really too toxic for patients. So that is one of our long-term strategy is surely want to show activity monotherapy, but ultimately we think it will be a combination agent.
And one last point on that, the actual episode for HER2 is different than the HER2. So you could in theory actually do a HER2 combo.
Kaveri Pohlman
Okay, got it. And if I can just throw one last one in there. Sorry, if I missed this, but how many patients will be in the upcoming data for 1592 next week for 1592?
Marty Huber
I think at now the Go abstract is available. And so in that dataset, there were 31 patients.
Kaveri Pohlman
Okay. Thank you.
Operator
(Operator Instructions) Michael Schmidt, Guggenheim.
Michael Schmidt
Hey, guys, good morning. Thanks for taking my questions. Just a couple of more on 1660 arm in the Phase one study could you comment on how the tumor histologies in this study compare perhaps to what CJ and Pfizer have shown in Phase one? And I think they had pretty decent signaling in breast cancer, is that is there overlap in so patient patient types in your study and theirs? And then just as we think on high level, you mentioned Europe planning to initiate the expansion cohort soon. Any views on just general positioning longer term relative to the CGN ADC in terms of and differentiation, perhaps is it is it mainly a lower talks on you and increased efficacy of both perhaps? And then how do you think about differential development opportunities versus what they've been doing? Thanks so much.
Marty Huber
Morning, Michael. I'm going to take the first part of your question that I'm going to turn it over to Brian to kind of talking about how we're thinking about the molecule longer term with regards to the current data. We are enrolling patients with triple negative breast cancer hormone receptor-positive breast cancer, endometrial cancer and ovarian cancer. So as part of the dose escalation, any one of those four histologies is eligible for the study. Once we get into backfill, we can be a little more specific. And while we have not given detailed information on who we are enrolling, I think a couple of points can be made is clearly triple-negative breast cancer is an area of high unmet medical need in which after patients progress on Trodelvy and or HER two, there's essentially nothing for those patients.
Brian DeSchuytner
So you will while we're not giving the details of how many of each that is a patient population that we will have in our dataset and if I can just expand on your question about differentiation and positioning on it this morning, remote and remarked earlier, one of the things that we're looking for in the asthma data was any indication of a B7-H4 on-target toxicity. We didn't see that, which is a nice validation of both the safety and the efficacy from those those abstracts. And so as a reminder, we've compared Dolasynthen ADCs versus BCNAEDC.s extensively preclinically, and we show that our platform preclinically can deliver payload to the tumor much more efficiently and effectively.
In addition, we've shown in our past clinical presentations for other product candidates that our payload appears to avoid the severe neutropenia peripheral neuropathy that tends to be dose limiting and then a Y. And so when you think about what that means is about expanding what an ADC can do in the clinic and whether that's combinations or the airlines to create for certain regiments. I think if you contrast with the hands of GSK and sort of the telcos in general, keep in mind that our payload is very much orthogonal to that class and many patients in this setting our receiving prior turbo ADC.
And so we believe this could be a consideration in the future landscape. And you see echoes of that in her commentary around the hand. So hence, our data and the Enhancer program also seems to have relatively profound myelosuppression that raises similar considerations about combinations and moves into earlier lines. So we think that the landscape that's been established by that asthma data disclosure at least leaves opportunity.
Michael Schmidt
Great. Thanks so much.
Operator
Asthika Goonewardene, Truist.
Asthika Goonewardene
Good morning, guys, and thanks for taking my question to you just very nicely laid out how heavily designed features for 1660 could be made your difference and we look at things like duration of response and duration of therapy, a good measure to do to confirm if that's actually had a clinical difference.
Marty Huber
So maybe I'll ask you guys given what we know about some of the B. seven H. four HDC.s, what kind of duration of response and duration of therapy would you be looking for in 1660 to say, aha, this is actually makes a difference in the clinic and with the patient treated with 60 60 as Marty's one, I would like to put a little caveat of looking at duration of response in phase one dataset even with pretty robust. And fulsome data is always challenging just because the number of responders to get a precise point estimate is always relatively limited. So we want to be a little careful about getting to obsess on that early on in the development program. However, we do agree. It's a very important question.
And if you think about it, the standard of care chemotherapy has a 5% objective response rate. And by the way, that's not even in a that's the control arm from the current ADCs that's not post Trodelvy or post in HER2. And importantly, the duration of response for that control arm was less than four months. So I think know a DOR. Usually, when we think about these things, you'll like to see a six, five, six one things that we were very excited about from upper East, while overall the response rate was lower. The one of the things you'll see in the data is that the risk, the duration of response for those patients who did respond to upgrade was over seven months so we think there's an opportunity to increase DOR. I think it's just going to be challenging, can clearly demonstrate that in the initial dataset.
Asthika Goonewardene
Got it. That's very helpful. But yes, I'm also wondering, you talked about how resistance emerging from prior payload exposure?
Marty Huber
It is a it is an issue that's emerging. A lot more news in the breast cancer patient population will the Phase one data set the dose escalation just to give us any sort of clues or be able to parse out when some patients who are developing resistance, it's quite a load and shows what the efficacy of 1660 reflecting that was that just too much to join fees out of that data set that's coming up.
Jason Fredette
We have. So this is Jason again. So again, I think it would be a little premature for us to pigeonhole ourselves into specific cuts of the data at this stage. We didn't know neither hands so NorSea, Jan showed any responses transparently, at least in post TIL, both treated patients. But again, we're not going to commit to that today.
Asthika Goonewardene
Got it. Thanks for taking my questions.
Operator
Brian Cheng, JPMorgan.
Brian Cheng
Great. Thanks for taking our questions this morning on May. First one is on from a modeling perspective, how should we think about the expense trajectory given your plan to move forward into potentially larger studies across a number of indications and out of quick follow-ups. Thank you.
Marty Huber
Sure. Well, you know, our cash runway guidance is based on our current operating plan commitments. That does include the early clinical development of both 1660 and 2056 but if I sort of double-click on your question, as you know, we don't provide forward-looking financial guidance, but you will note in our press release and our remarks in the K that we report reported a significant reduction in OpEx in Q4 and have sent them substantially completed our upgrade wind down. So we think this meaningful lease simplified cost structure is going to enable our available funds to support our operating plan commitments into 2026.
Brian Cheng
Great. And then second is on dose. The dose escalation work that you're doing for 16, 60 how does the latest escalation to 59 migs per meter square compare to your peers and who are also targeting B7-H4? Maybe you can also provide some color on the expected therapeutic window that you expect to see compared to your peers? Thank you.
Marty Huber
We want to be careful on directly comparison across the ADCs for there's several differences in these small molecules I mean not only do they have different amounts of payload. We have a DAR six. But in addition, the potency of the payload is different. And then one fundamental difference is because of our scaffold, our dose of the platform with the improved drug-like properties and antibody-like half-life, we end up having allowing a less frequent dosing either Q3 or Q4. But what that's associated with if you think about it is a slower clearance of the molecule because it has an antibody-like half-life. So it gets very complicated to trying to do a direct detailed comparison until we get the full data disclosure and then we can start having that conversation.
Brian Cheng
Great. Thank you. My thanks.
Operator
Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Dr. Marty Huber for any closing remarks.
Marty Huber
Thank you, operator, and thanks, everyone, for dialing in, and we hope to see some of you in the next couple of weeks at Asco as well as Callon and at Lyric. So that concludes the call. Operator. Thank you.
Operator
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
