mrsn-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-38129

Mersana Therapeutics, Inc.

(Exact name of registrant as specified in its charter)


Delaware			04-3562403
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

840 Memorial Drive Cambridge, MA 02139

(Address of principal executive offices)

(Zip Code)

(617) 498-0020

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	MRSN	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 69,561,813 shares of Common Stock ($0.0001 par value per share) outstanding as of May 6, 2021.

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Unless otherwise stated or the context requires otherwise, all references to “us,” “our,” “we,” the “Company” and similar designations in this Quarterly Report on Form 10-Q refer to Mersana Therapeutics, Inc. and its consolidated subsidiary, Mersana Securities Corp.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, our clinical results and other future conditions. The words “aim,” “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “on track,” “plan,” “possible,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

These forward-looking statements include, among other things, statements about:

•the initiation, cost, timing, progress and results of our current and future research and development activities and preclinical and clinical studies;

•the adequacy of our inventory of upifitamab rilsodotin (UpRi, XMT-1536) and XMT-1592 to support our ongoing clinical studies, as well as the outcome of planned manufacturing runs;

•the timing of, and our ability to obtain and maintain, regulatory approvals for our product candidates;

•unmet need of ovarian cancer and non-small cell lung cancer;

•our ability to quickly and efficiently identify and develop additional product candidates;

•our ability to advance any product candidate into, and successfully complete, clinical studies;

•our intellectual property position, including with respect to our trade secrets;

•the potential benefits of strategic partnership agreements and our ability to enter into selective strategic partnerships;

•our estimates regarding expenses, future revenues, capital requirements, the sufficiency of our current and expected cash resources and our need for additional financing; and

•the potential impact of the ongoing COVID-19 pandemic.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in our Annual Report on Form 10-K for the year ended December 31, 2020, and this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021, particularly in the “Risk factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

In addition, the COVID-19 pandemic could adversely affect our preclinical and clinical development efforts, business operations and financial results. The extent of the impact and the value of and market for our common stock will also depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, physical distancing and business closure requirements in the U.S. and in other countries, and the effectiveness of actions taken globally to contain and treat the disease.

The forward-looking statements contained herein represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

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RISK FACTORS SUMMARY

Our business is subject to varying degrees of risk and uncertainty. Investors should consider the risks and uncertainties summarized below, as well as the risks and uncertainties discussed in Part II, Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

Our business is subject to the following principal risks and uncertainties:

•We have incurred net losses since our inception, we have no products approved for commercial sale and we anticipate that we will continue to incur substantial operating losses for the foreseeable future.

•We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

•We have a credit facility that requires us to meet certain operating covenants and place restrictions on our operating and financial flexibility.

•We face substantial competition, which may result in others discovering, developing or commercializing products before, or more successfully than, we do.

•We only have two product candidates, upifitamab rilsodotin (UpRi, XMT-1536) and XMT-1592, in clinical studies. A failure of any of our product candidates in clinical development would adversely affect our business and may require us to discontinue development of other product candidates based on the same technology.

•We can provide no assurance that our clinical product candidates will obtain regulatory approval or that the results of clinical studies will be favorable.

•Drug discovery and development is a complex, time-consuming and expensive process that is fraught with risk and a high rate of failure. We can provide no assurance of the successful and timely development of new ADC products.

•If we fail to attract and keep senior management and key scientific personnel, we may be unable to successfully develop our ADC product candidates, conduct our clinical studies and commercialize our ADC product candidates.

•We may encounter difficulties in managing our growth and expanding our operations successfully.

•As a pharmaceutical manufacturer, our activities, including our interactions with healthcare providers, third party payors, patients and government officials, are, and will continue to be, subject to extensive regulation involving health care, anti-corruption, data privacy and security and consumer protection laws. Failure to comply with applicable laws could result in substantial penalties, contractual damages, reputational harm, diminished revenues and curtailment or restructuring of our operations.

•We rely upon patents and other intellectual property rights to protect our technology. We may be unable to protect our intellectual property rights, and we may be liable for infringing the intellectual property rights of others.

•Our business is subject to risks arising from the outbreaks of disease, such as epidemics or pandemics, including the ongoing COVID-19 pandemic.

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TABLE OF CONTENTS


			Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020			5
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2021 and 2020			6
Condensed Consolidated Statement of Stockholders’ Equity for th e three months ended March 31, 2021 and 2020			7
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020			8
Notes to Condensed Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			21
Item 3. Quantitative and Qualitative Disclosures About Market Risk			29
Item 4. Controls and Procedures			30
PART II - OTHER INFORMATION			31
Item 1. Legal Proceedings			31
Item 1A. Risk Factors			31
Item 6. Exhibits			70
Signatures			71

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mersana Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	228,430	$	255,094


Prepaid expenses and other current assets	3,522		3,486
Total current assets	231,952		258,580
Property and equipment, net	1,918		1,730
Operating lease right-of-use assets	10,521		10,936
Other assets	3,520		2,153
Total assets	$	247,911	$	273,399
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	11,743	$	8,340
Accrued expenses	17,496		16,146
Deferred revenue	3,976		3,987
Operating lease liabilities	1,570		1,437

Other liabilities	134		93
Total current liabilities	34,919		30,003
Operating lease liabilities	9,726		10,158
Long-term debt, net	5,010		4,977
Other liabilities	318		174
Total liabilities	49,973		45,312
Commitments (Note 10)
Stockholders' equity:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	—		—
Common stock,$0.0001 par value; 175,000,000 shares authorized; 69,051,438 and 68,841,288 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	7		7
Additional paid-in capital	513,043		508,499
Accumulated other comprehensive income (loss)	—		—
Accumulated deficit	(315,112)		(280,419)
Total stockholders’ equity	197,938		228,087
Total liabilities and stockholders’ equity	$	247,911	$	273,399

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Mersana Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended March 31,
	2021		2020
Collaboration revenue	$	11	$	11
Operating expenses:
Research and development	27,415		12,219
General and administrative	7,208		4,936
Total operating expenses	34,623		17,155
Other income (expense):
Interest income	12		306
Interest expense	(93)		(88)
Total other income (expense), net	(81)		218
Net loss	(34,693)		(16,926)
Other comprehensive loss
Unrealized gain (loss) on marketable securities	—		(29)
Comprehensive loss	$	(34,693)	$	(16,955)
Net loss attributable to common stockholders — basic and diluted	$	(34,693)	$	(16,926)
Net loss per share attributable to common stockholders — basic and diluted	$	(0.50)	$	(0.35)

Weighted-average number of shares of common stock used in net loss per share attributable to common stockholders — basic and diluted	68,987,857		47,988,630

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Mersana Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Stockholders’ Equity
	Shares	Amount

























Balance at December 31, 2019	45,388,023	$	5	$	270,662	$	25	$	(192,374)	$	78,318
Exercise of common stock warrant in exchange for common stock	2,574,971	—		—		—		—		—
Exercise of stock options	43,055	—		119		—		—		119
Stock-based compensation expense	—	—		1,609		—		—		1,609
Other comprehensive loss	—	—		—		(29)		—		(29)
Net loss	—	—		—		—		(16,926)		(16,926)
Balance at March 31, 2020	48,006,049	$	5	$	272,390	$	(4)	$	(209,300)	$	63,091
Issuance of common stock from at-the-market transactions, net of issuance costs of $2,176	10,900,599	1		62,976		—		—		62,977
Issuance of common stock under public offering, net of issuance costs of $10,809	9,200,000	1		163,990		—		—		163,991
Purchase of common stock under ESPP	68,419	—		333		—		—		333
Exercise of stock options	206,143	—		1,296		—		—		1,296
Stock-based compensation expense	—	—		1,656		—		—		1,656
Other comprehensive income	—	—		—		6		—		6
Net loss	—	—		—		—		(19,786)		(19,786)
Balance at June 30, 2020	68,381,210	$	7	$	502,641	$	2	$	(229,086)	$	273,564
Exercise of stock options	88,871	—		317		—		—		317
Stock-based compensation expense	—	—		1,918		—		—		1,918
Other comprehensive loss	—	—		—		(2)		—		(2)
Net loss	—	—		—		—		(22,489)		(22,489)
Balance at September 30, 2020	68,470,081	$	7	$	504,876	$	—	$	(251,575)	$	253,308
Exercise of stock options	359,359	—		1,406		—		—		1,406
Purchase of common stock under ESPP	11,848	—		228		—		—		228
Stock-based compensation expense	—	—		1,989		—		—		1,989
Net loss	—	—		—		—		(

SEC Form 10-Q filed by Mersana Therapeutics, Inc.