Financial Data and Key Metrics Changes - Net cash used in operating activities in Q4 was $42 million, with a year-end cash balance of $178 million [38] - The company raised $40 million from Janssen and $46 million through strategic use of its ATM in early 2022, enhancing its financial position [38] - The total available capital, including cash and credit facilities, is approximately $300 million, expected to fund operations into the second half of 2023 [40] Business Line Data and Key Metrics Changes - The UPLIFT trial is on track for full enrollment in Q3 2022, with data readout expected in early 2023 [11][31] - UP-NEXT, a Phase 3 trial, is set to initiate enrollment in Q2 2022, targeting NaPi2b high, recurrent, platinum-sensitive ovarian cancer [13] - UPGRADE, a Phase 1/2 trial, anticipates interim data disclosure in the second half of 2022 [14] Market Data and Key Metrics Changes - The company is focusing on building UpRi as a foundational therapy in ovarian cancer, with ongoing trials expected to generate significant data [10][27] - The collaboration with Janssen includes a $40 million upfront payment and potential total milestones exceeding $1 billion, indicating strong market interest in ADCs [26] Company Strategy and Development Direction - The company aims to establish itself as a leading ADC company through four strategic pillars: building UpRi, expanding its pipeline, fostering innovation, and maintaining a strong financial position [9][10] - Strategic partnerships are seen as essential for expanding the external pipeline and generating financial contributions [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the robust efficacy and tolerability profile of UpRi, which is expected to improve patient outcomes [16] - The company is well-positioned to transform into a commercial stage entity with a deep pipeline of innovative molecules [46] Other Important Information - The company has completed IND-enabling studies for XMT-1660 and XMT-2056, both set to enter the clinic in mid-2022 [18] - The company is exploring dose for XMT-1592, with a data-driven decision expected in the second half of 2022 [19] Q&A Session Summary Question: Discussion on business development and cash position - Management highlighted a strong capital position and outlined three pillars of business development strategy, including cytotoxic platforms and Immunosynthen platform [50][52] Question: Expectations for SGO presentation - Management confirmed that multiple posters will be presented, including data supporting the decision to move towards a lower dose of UpRi [60] Question: Exposure in Eastern Europe for ongoing studies - Management clarified that there is no exposure in Eastern Europe, with enrollment primarily in the US and Western Europe [63] Question: Changes in enrollment criteria for UPLIFT study - Management reported positive engagement from investigators and maintained guidance for Q3 completion of enrollment [71] Question: Insights on PFS from placebo arm in UP-NEXT study - Management indicated that the placebo arms in similar studies showed progression-free survival in the four to five month range, highlighting the unmet need [80] Question: Strategy for patient selection in UP-NEXT and UPLIFT studies - Management stated that UPLIFT could serve as a confirmatory study for high NaPi2b patients, while UP-NEXT is designed to include all patients regardless of NaPi2b status [84] Question: Confirmation of data cut for SGO update - Management confirmed that the SGO update will reflect a June 10 data cut, emphasizing the robustness of the data [87] Question: Benchmarks for UPGRADE interim data - Management indicated that the control arm of GOG-0213 is the most appropriate comparator, with response rates around 50% in earlier studies [93]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021. OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-38129 Mersana Therapeutics, Inc. (Exact name of registrant as specified in its charter) Delaware 04-3562403 (State ...

Mersana Therapeutics, Inc. (NASDAQ:MRSN) Q3 2021 Earnings Conference Call November 9, 2021 8:00 AM ET Company Participants Sarah Carmody - Executive Director, IR & Corporate Communications Anna Protopapas - President, CEO & Director Arvin Yang - SVP & Chief Medical Officer Timothy Lowinger - Chief Science & Technology Officer Brian DeSchuytner - SVP & CFO Conference Call Participants Boris Peaker - Cowen and Company Kaveri Pohlman - BTIG Daniel Wolle - JPMorgan Chase & Co. Colleen Kusy - Robert W. Baird & C ...

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 September 30, 2021 OR ☐ 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) (State or other jurisdiction of incorporation or organization) Delaware 04-356240 ...

Mersana Therapeutics, Inc. (NASDAQ:MRSN) Q2 2021 Earnings Conference Call August 6, 2021 8:00 AM ET Company Participants Sarah Carmody - Executive Director, IR & Corporate Communications Anna Protopapas - President, CEO & Director Brian DeSchuytner - SVP, Finance & Product Strategy Timothy Lowinger - Chief Science & Technology Officer Arvin Yang - SVP & Chief Medical Officer Conference Call Participants Jonathan Chang - SVB Leerink Kaveri Pohlman - BTIG Boris Peaker - Cowen and Company Jessica Fye - JPMorga ...

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 June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Address of principal executive offices) (Zip Code) (617) 498-0020 (Registrant's telephone number, including area code) Commission file number 001-38129 Mersana Therapeutics, Inc. (Exact name of regist ...

Financial Data and Key Metrics Changes - The company ended Q1 2021 with $228 million in cash and cash equivalents, with a net cash used in operating activities of $27 million [51] - Research and development expenses for Q1 2021 were approximately $27.4 million, up from $12.2 million in the same period in 2020, primarily due to increased manufacturing and clinical expenses [52] - General and administrative expenses for Q1 2021 were approximately $7.2 million, compared to $4.9 million in the same period in 2020, driven by increased headcount and consulting fees [53] - The net loss for Q1 2021 was $34.7 million or $0.50 per share, compared to a net loss of $16.9 million or $0.35 per share for the same period in 2020 [55] Business Line Data and Key Metrics Changes - The UpRi Phase 1 study in ovarian cancer showed a response rate of approximately 30%, significantly above the current standard of care [13] - The UPLIFT study has initiated patient dosing, focusing on a broader patient population and allowing for flexible inclusion criteria [15][16] - The UpRi lung adenocarcinoma expansion cohort continues to enroll patients, with a goal of approximately 40 to 45 patients this year [24] Market Data and Key Metrics Changes - The prevalence of NaPi2b high in the lung adenocarcinoma outpatient group is lower than in ovarian cancer, with about one-third of patients having high NaPi2b expression [65] - The company plans to disclose data from the UpRi lung adenocarcinoma cohort in the second half of the year [65] Company Strategy and Development Direction - The company aims to establish UpRi as a foundational medicine in ovarian cancer and expand its innovative ADC pipeline [57] - The UPGRADE study is designed to evaluate UpRi in combination with other therapies, with plans to initiate patient dosing in Q3 2021 [30][23] - The company is advancing two early-stage candidates, XMT-1660 and XMT-2056, through IND-enabling studies, with clinical studies expected to start in early 2022 [26][38] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about robust enrollment in the UPLIFT study, leveraging the momentum from the expansion cohort [62] - The company acknowledges the potential impact of COVID-19 on clinical trials but remains confident in its enrollment strategies [62][64] - Management highlighted the significant unmet medical need in ovarian cancer and the commitment to improving patient outcomes [58] Other Important Information - The company has developed a robust diagnostic assay for NaPi2b expression, which will be validated in the UPLIFT study [100] - The relationship with Leica for the diagnostic development is not exclusive, allowing for potential future partnerships [105] Q&A Session Summary Question: Impact of COVID-19 on UpRi clinical trials - Management reported robust enrollment in the expansion cohort and is optimistic about UPLIFT due to broad inclusion criteria and partnerships with cooperative groups [62][64] Question: Investor expectations for UpRi and XMT-1592 readouts - The company is on track to enroll 40 to 45 lung adenocarcinoma patients and disclose data in the second half of the year [65] Question: Relation between NaPi2b expression and duration of response - Management noted consistency in NaPi2b expression levels and potential for enrichment of objective response rates based on expression levels [72] Question: Bevacizumab's role in UPGRADE study - Management clarified that the study is initially combining UpRi with carboplatin, with potential for future combinations including bevacizumab [77] Question: Enrollment dynamics for lung cancer cohort - Management acknowledged previous delays due to COVID-19 but is now on track to recruit the targeted number of patients [86] Question: Dose escalation strategy for XMT-1592 - Management stated that comprehensive data will be disclosed in the second half of the year, maintaining a disciplined approach to data sharing [88] Question: Validation of the diagnostic assay - Management outlined plans to validate the diagnostic assay using the UPLIFT cohort, with potential for a complementary or companion diagnostic [102]

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements (unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, stockholders' equity, cash flows, and notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031,%202021%20and%20December%2031,%202020) | Metric | March 31, 2021 (in thousands) | December 31, 2020 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $228,430 | $255,094 | | Total current assets | $231,952 | $258,580 | | Total assets | $247,911 | $273,399 | | Total current liabilities | $34,919 | $30,003 | | Total liabilities | $49,973 | $45,312 | | Total stockholders' equity | $197,938 | $228,087 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20three%20months%20ended%20March%2031,%202021%20and%202020) | Metric (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Collaboration revenue | $11 | $11 | | Research and development | $27,415 | $12,219 | | General and administrative | $7,208 | $4,936 | | Total operating expenses | $34,623 | $17,155 | | Net loss | $(34,693) | $(16,926) | | Net loss per share (basic and diluted) | $(0.50) | $(0.35) | - The company's net loss significantly increased to **$34.7 million** for the three months ended March 31, 2021, compared to **$16.9 million** for the same period in 2020, primarily driven by increased research and development expenses[19](index=19&type=chunk)[30](index=30&type=chunk) [Condensed Consolidated Statement of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Stockholders'%20Equity%20for%20the%20three%20months%20ended%20March%2031,%202021%20and%202020) | Metric (in thousands) | Balance at December 31, 2020 | Balance at March 31, 2021 | | :-------------------- | :--------------------------- | :------------------------ | | Common Stock Shares | 68,841,288 | 69,051,438 | | Common Stock Amount | $7 | $7 | | Additional Paid-in Capital | $508,499 | $513,043 | | Accumulated Deficit | $(280,419) | $(315,112) | | Total Stockholders' Equity | $228,087 | $197,938 | - Stockholders' equity decreased from **$228.1 million** at December 31, 2020, to **$197.9 million** at March 31, 2021, primarily due to the net loss of **$34.7 million**, partially offset by stock-based compensation expense and proceeds from stock option exercises[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031,%202021%20and%202020) | Cash Flow Activity (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(27,022) | $(21,246) | | Net cash provided by (used in) investing activities | $(114) | $19,435 | | Net cash provided by (used in) financing activities | $472 | $(90) | | Decrease in cash, cash equivalents and restricted cash | $(26,664) | $(1,901) | | Cash, cash equivalents and restricted cash, end of period | $228,751 | $60,771 | - Net cash used in operating activities increased to **$27.0 million** in Q1 2021 from **$21.2 million** in Q1 2020, reflecting higher net losses. Investing activities shifted from a net cash inflow of **$19.4 million** in Q1 2020 (due to marketable securities maturities) to a net cash outflow of **$0.1 million** in Q1 2021 (due to equipment purchases)[25](index=25&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Nature of business and basis of presentation](index=9&type=section&id=1.%20Nature%20of%20business%20and%20basis%20of%20presentation) - Mersana Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing antibody drug conjugates (ADCs) for cancer patients, utilizing proprietary platforms like Dolaflexin, Dolasynthen, and Immunosynthen. Key product candidates include upifitamab rilsodotin (UpRi, XMT-1536) and XMT-1592, both targeting NaPi2b, and early-stage programs like XMT-1660 and XMT-2056[27](index=27&type=chunk)[28](index=28&type=chunk) - The company has incurred cumulative net losses since inception, with a net loss of **$34.7 million** for the three months ended March 31, 2021, and an accumulated deficit of **$315.1 million**. Management believes current funds are sufficient for operations through at least the next twelve months[30](index=30&type=chunk)[31](index=31&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The financial statements are prepared in accordance with U.S. GAAP and SEC rules, consolidating Mersana Therapeutics, Inc. and its wholly-owned subsidiary. The company operates as a single segment focused on discovering and developing ADCs. Significant accounting policies are consistent with the 2020 Annual Report on Form 10-K, with fair value measurements categorized into a three-level hierarchy[32](index=32&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) Cash, Cash Equivalents and Restricted Cash (in thousands) | Cash, Cash Equivalents and Restricted Cash (in thousands) | Beginning of Period | End of Period | | :------------------------------------------------------- | :------------------ | :------------ | | March 31, 2021 | $255,415 | $228,751 | | March 31, 2020 | $62,672 | $60,771 | [Note 3. Collaboration agreements](index=12&type=section&id=3.%20Collaboration%20agreements) - The company has a Collaboration and Commercial License Agreement with Merck KGaA, under which it receives reimbursement for research efforts and is eligible for development milestone payments. Revenue from this agreement is recognized over the estimated period of research and development services using a proportional performance model[52](index=52&type=chunk)[53](index=53&type=chunk)[57](index=57&type=chunk) Collaboration Revenue (in thousands) | Collaboration Revenue (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Collaboration revenue | $11 | $11 | - Deferred revenue related to the Merck KGaA Agreement and Supply Agreement was **$3.976 million** as of March 31, 2021. The company also has a collaboration with Asana BioSciences, with a potential **$2.5 million** milestone payment upon dosing the fifth patient in a Phase 1 clinical study, which is currently constrained due to high uncertainty[59](index=59&type=chunk)[63](index=63&type=chunk) [Note 4. Fair value measurements](index=15&type=section&id=4.%20Fair%20value%20measurements) - The carrying amounts of current assets and liabilities like prepaid expenses, accounts payable, and accrued expenses approximate their fair values due to their short-term nature. The fair value of the outstanding debt under the Amended Credit Facility also approximates its carrying value (Level 2 fair value measurement)[64](index=64&type=chunk)[65](index=65&type=chunk) [Note 5. Accrued expenses](index=15&type=section&id=5.%20Accrued%20expenses) Accrued Expenses (in thousands) | Accrued Expenses (in thousands) | March 31, 2021 | December 31, 2020 | | :------------------------------ | :------------- | :---------------- | | Accrued preclinical, manufacturing and clinical expenses | $13,399 | $9,902 | | Accrued payroll and related expenses | $2,972 | $5,412 | | Accrued professional fees and insurance | $993 | $757 | | Accrued other | $132 | $75 | | Total Accrued Expenses | $17,496 | $16,146 | - Total accrued expenses increased from **$16.1 million** at December 31, 2020, to **$17.5 million** at March 31, 2021, primarily due to a **$3.5 million** increase in accrued preclinical, manufacturing, and clinical expenses[66](index=66&type=chunk) [Note 6. Debt](index=15&type=section&id=6.%20Debt) - The company has a Credit Facility with Silicon Valley Bank, allowing for term loans up to **$30.0 million**. As of March 31, 2021, **$5.2 million** had been drawn, and the company was in compliance with all covenants[67](index=67&type=chunk)[69](index=69&type=chunk) Estimated Future Principal Payments (in thousands) | Estimated Future Principal Payments (in thousands) | | :----------------------------------------------- | | 2021 (excluding Q1) | $0 | | 2022 | $1,213 | | 2023 | $2,080 | | 2024 | $1,907 | | Total debt | $5,200 | - Interest expense related to the credit facility was **$88 thousand** for the three months ended March 31, 2021, up from **$51 thousand** in the prior year period[70](index=70&type=chunk) [Note 7. Stockholders' equity](index=17&type=section&id=7.%20Stockholders'%20equity) - As of March 31, 2021, the company had **25,000,000** authorized preferred stock shares (none issued) and **175,000,000** authorized common stock shares, with **69,051,438** shares issued and outstanding[17](index=17&type=chunk)[71](index=71&type=chunk) - In April 2020, the company raised **$63.0 million** net proceeds from an at-the-market (ATM) equity offering program. In June 2020, a follow-on public offering generated **$164.0 million** net proceeds. A new ATM program was established in May 2020 for up to **$100.0 million**, with no shares sold under it as of March 31, 2021[72](index=72&type=chunk)[73](index=73&type=chunk)[75](index=75&type=chunk) Common Stock Reserved for Exercise (in shares) | Common Stock Reserved for Exercise (in shares) | March 31, 2021 | December 31, 2020 | | :--------------------------------------------- | :------------- | :---------------- | | Stock options | 7,478,289 | 6,112,948 | | Restricted stock units | 1,082,460 | 716,767 | | Warrants | 39,474 | 39,474 | | Total | 8,600,223 | 6,869,189 | [Note 8. Stock options](index=18&type=section&id=8.%20Stock%20options) - The 2017 Stock Incentive Plan allows for grants of options, RSUs, or other stock-based awards, with **2,188,263** shares available for future issuance as of March 31, 2021. In Q1 2021, **2,051,293** RSUs and options were granted[83](index=83&type=chunk) Stock Option Activity (shares) | Stock Option Activity (shares) | Outstanding at Jan 1, 2021 | Granted | Exercised | Cancelled | Outstanding at Mar 31, 2021 | | :----------------------------- | :------------------------- | :---------- | :---------- | :---------- | :-------------------------- | | Number of Shares | 6,112,948 | 1,650,507 | (148,472) | (136,694) | 7,478,289 | | Weighted Average Exercise Price | $7.84 | $20.78 | $5.15 | $7.00 | $10.77 | Stock-based Compensation Expense (in thousands) | Stock-based Compensation Expense (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Stock options | $3,114 | $1,233 | | Restricted stock units | $806 | $310 | | Employee stock purchase plan | $119 | $66 | | Total operating expenses | $4,039 | $1,609 | - Unrecognized stock compensation expense as of March 31, 2021, was **$39.7 million** for stock options (weighted-average period of 3.1 years) and **$12.1 million** for RSUs (weighted-average period of 3.5 years)[93](index=93&type=chunk) [Note 9. Leases](index=21&type=section&id=9.%20Leases) - The company has an operating lease for its Cambridge, MA office space through March 2026 and finance leases for equipment. A standby letter of credit of **$321 thousand** serves as a security deposit for the office lease[96](index=96&type=chunk)[97](index=97&type=chunk) Future Lease Payments (in thousands) | Future Lease Payments (in thousands) | Operating Leases | Finance Leases | | :----------------------------------- | :--------------- | :------------- | | 2021 (excluding Q1) | $2,169 | $123 | | 2022 | $2,843 | $128 | | 2023 | $2,928 | $121 | | 2024 | $3,016 | $60 | | 2025 and thereafter | $3,889 | $56 | | Total lease payments | $14,845 | $488 | | Present value of lease liabilities | $11,296 | $452 | [Note 10. Commitments](index=22&type=section&id=10.%20Commitments) - The company did not record any research and development expense related to non-refundable upfront payments or milestone payments during the three months ended March 31, 2021 or 2020[101](index=101&type=chunk) [Note 11. Subsequent Events](index=22&type=section&id=11.%20Subsequent%20Events) - On April 5, 2021, the company amended its Office Lease for additional space, committing to **$4.983 million** in lease payments over five years starting July 1, 2021, and increasing the security deposit by **$156 thousand**[103](index=103&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition, results of operations, future outlook, and liquidity, including COVID-19 impact [Overview](index=23&type=section&id=Overview) - Mersana Therapeutics is a clinical-stage biopharmaceutical company developing Antibody Drug Conjugates (ADCs) for cancer, leveraging proprietary platforms like Dolaflexin, Dolasynthen, and Immunosynthen. Lead candidates include Upifitamab rilsodotin (UpRi, XMT-1536) and XMT-1592, both targeting NaPi2b, with UpRi in a single-arm registration strategy (UPLIFT) and a combination study (UPGRADE) planned[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) - The company has incurred significant cumulative operating losses, with a net loss of **$34.7 million** for Q1 2021, and expects continued losses as it advances clinical development, identifies new candidates, and expands operations[118](index=118&type=chunk)[119](index=119&type=chunk) [Impact of COVID-19 on Our Business](index=24&type=section&id=Impact%20of%20COVID-19%20on%20Our%20Business) - The company is monitoring the COVID-19 pandemic's impact, implementing remote work and staggered lab schedules. While Q1 2021 financial results were not materially affected, future impacts are uncertain, with potential risks including clinical study delays, supply chain disruptions, and slower regulatory review[119](index=119&type=chunk)[121](index=121&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk) - Mitigation efforts include initiating additional clinical sites globally to increase enrollment and monitoring contract manufacturing partners, who continue to operate near normal levels, though raw material sourcing for COVID-related vaccines and therapies poses an increasing challenge[119](index=119&type=chunk)[126](index=126&type=chunk) [Financial operations overview](index=26&type=section&id=Financial%20operations%20overview) - All revenue to date has been from strategic partnerships, primarily with Merck KGaA, with immaterial amounts recognized in Q1 2021 and Q1 2020. The company expects future revenue to continue to be generated from collaborations, with uncertain timing and amount of milestone payments[122](index=122&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) - Research and development expenses are central to the business, including drug discovery, manufacturing, and clinical studies. These costs are expensed as incurred and are expected to increase significantly with the progression of product candidates[127](index=127&type=chunk)[128](index=128&type=chunk) - General and administrative expenses are expected to increase to support continued R&D activities, including hiring additional personnel and increased consulting and patent costs[134](index=134&type=chunk) [Results of Operations: Comparison of the three months ended March 31, 2021 and 2020](index=28&type=section&id=Results%20of%20Operations) | Metric (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Dollar Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------------ | | Collaboration revenue | $11 | $11 | $0 | | Research and development | $27,415 | $12,219 | $15,196 | | General and administrative | $7,208 | $4,936 | $2,272 | | Total operating expenses | $34,623 | $17,155 | $17,468 | | Interest income | $12 | $306 | $(294) | | Interest expense | $(93) | $(88) | $(5) | | Net loss | $(34,693) | $(16,926) | $(17,767) | - Research and development expense increased by **$15.2 million** (124%) to **$27.4 million** in Q1 2021, primarily due to increased manufacturing, clinical, and regulatory activities for UpRi (**$7.1 million** increase), preclinical/discovery programs (**$2.9 million** increase), and XMT-1592 (**$1.5 million** increase), along with higher employee compensation and stock-based compensation[139](index=139&type=chunk)[140](index=140&type=chunk) - General and administrative expense increased by **$2.3 million** (46%) to **$7.2 million** in Q1 2021, driven by higher employee compensation (**$0.6 million**), consulting/professional fees (**$0.8 million**), and stock-based compensation (**$0.9 million**)[141](index=141&type=chunk) - Total other income shifted from a net income of **$0.2 million** in Q1 2020 to a net expense of **$0.1 million** in Q1 2021, mainly due to a decrease in interest income[143](index=143&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) - The company's operations are financed primarily through equity offerings and strategic partnerships. As of March 31, 2021, cash and cash equivalents totaled **$228.4 million**. A new ATM program established in May 2020 has **$100.0 million** of availability[144](index=144&type=chunk)[145](index=145&type=chunk)[147](index=147&type=chunk) Cash Flows (in thousands) | Cash Flows (in thousands) | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(27,022) | $(21,246) | | Net cash provided by (used in) investing activities | $(114) | $19,435 | | Net cash provided by (used in) financing activities | $472 | $(90) | - The company expects cash expenditures to increase with ongoing R&D and clinical activities. Current funds are projected to be sufficient for approximately the next two years, but additional financing may be required sooner due to various factors, including the uncertain nature of clinical development and regulatory approvals[153](index=153&type=chunk)[154](index=154&type=chunk)[215](index=215&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company did not have any off-balance sheet arrangements during the periods presented[160](index=160&type=chunk) [Critical accounting policies and significant judgments and estimates](index=33&type=section&id=Critical%20accounting%20policies%20and%20significant%20judgments%20and%20estimates) - The financial statements require management judgments and estimates, which are evaluated ongoingly. No material changes to critical accounting policies were reported compared to the 2020 Annual Report on Form 10-K[161](index=161&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's market risk exposure, primarily interest rate sensitivity, and current lack of foreign currency risk - The company's primary market risk exposure is interest rate sensitivity, as investments are in short-term, low-risk instruments like U.S. Treasury obligations, commercial paper, and corporate bonds. A **100 basis point** change in interest rates is not expected to materially affect the fair market value of its investment portfolio[162](index=162&type=chunk)[163](index=163&type=chunk) - Currently, the company is not exposed to foreign currency exchange rate risk, but this may change if it contracts with vendors in Asia and Europe[164](index=164&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2021[166](index=166&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended March 31, 2021, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[167](index=167&type=chunk) PART II - OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) This section states the company is not currently party to any legal proceedings or claims expected to have a material adverse effect on its business - As of the date of this report, Mersana Therapeutics is not involved in any legal proceedings or claims that, if determined adversely, would individually or in aggregate have a material adverse effect on its business[169](index=169&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks and uncertainties that could materially affect the company's business, financial condition, and future growth prospects [Risks related to development and approval of our ADC product candidates](index=35&type=section&id=Risks%20related%20to%20development%20and%20approval%20of%20our%20ADC%20product%20candidates) - Early clinical results are not predictive of future success, and product candidates may fail at any stage of development. Clinical studies may not demonstrate sufficient efficacy and safety for regulatory approval, and serious adverse events (SAEs), including death, have been observed and are expected to continue[172](index=172&type=chunk)[173](index=173&type=chunk)[203](index=203&type=chunk)[204](index=204&type=chunk) - Delays in clinical studies due to factors like regulatory consensus, patient enrollment, or manufacturing issues could increase costs and delay or prevent commercialization. The company currently has only two clinical-stage candidates (UpRi and XMT-1592), and failure of either could significantly impact the business[177](index=177&type=chunk)[178](index=178&type=chunk)[181](index=181&type=chunk)[182](index=182&type=chunk) - Even with Fast Track Designation (granted for UpRi) or potential Breakthrough Therapy Designation, there is no guarantee of faster development or approval. Obtaining regulatory approval outside the U.S. requires separate processes and compliance, which may differ significantly from FDA requirements[186](index=186&type=chunk)[187](index=187&type=chunk)[199](index=199&type=chunk) [Risks related to our financial position and need for additional capital](index=44&type=section&id=Risks%20related%20to%20our%20financial%20position%20and%20need%20for%20additional%20capital) - The company has incurred significant net losses since inception (**$315.1 million** accumulated deficit as of March 31, 2021) and expects to continue incurring substantial operating losses for the foreseeable future, with no product sales revenue to date[211](index=211&type=chunk)[212](index=212&type=chunk) - Substantial additional financing will be required to achieve goals, and failure to obtain capital could force delays or termination of product development. Raising capital may dilute existing stockholders, and debt financing may impose restrictive covenants[215](index=215&type=chunk)[217](index=217&type=chunk) - The company's credit facility with Silicon Valley Bank is secured by substantially all assets (excluding intellectual property) and includes customary covenants. An event of default could lead to increased interest rates, accelerated payments, and disposal of collateral[218](index=218&type=chunk)[219](index=219&type=chunk) [Risks related to our reliance on third parties](index=47&type=section&id=Risks%20related%20to%20our%20reliance%20on%20third%20parties) - The company relies on third-party contract manufacturers for preclinical and clinical product supplies, lacking internal manufacturing capabilities. Failure of these manufacturers to meet specifications or regulatory requirements (cGMP) could lead to supply limitations, delays, or regulatory issues[221](index=221&type=chunk)[223](index=223&type=chunk) - Scaling up manufacturing for commercial quantities poses challenges, and an inability to do so in a timely or cost-effective manner could delay development and commercialization[226](index=226&type=chunk) - Reliance on CROs and other third parties for clinical studies reduces direct control and introduces risks of delays, unsuccessful studies, or non-compliance with GCP. Strategic partnerships are crucial for R&D and commercialization, but partners may not perform as expected, terminate agreements, or pursue competing products[227](index=227&type=chunk)[231](index=231&type=chunk)[233](index=233&type=chunk)[235](index=235&type=chunk) [Risks related to commercialization of our ADC product candidates](index=50&type=section&id=Risks%20related%20to%20commercialization%20of%20our%20ADC%20product%20candidates) - Commercial success depends on significant market acceptance by physicians, patients, and healthcare payors, influenced by efficacy, safety, cost, and reimbursement. If market opportunities are smaller than estimated, revenue and profitability will be adversely affected[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - The company lacks a sales and marketing infrastructure and will need to build one or rely on third parties, which involves significant costs and risks. Failure to establish effective capabilities could lead to lower product revenues and profitability[242](index=242&type=chunk)[243](index=243&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) - Reimbursement for products may be limited or unavailable, hindering profitable sales. Government and private payors are focused on cost containment, potentially leading to price controls and reduced demand, especially in foreign markets[248](index=248&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk)[254](index=254&type=chunk) [Risks related to our intellectual property](index=55&type=section&id=Risks%20related%20to%20our%20intellectual%20property) - The company's success depends on obtaining and protecting intellectual property (IP) rights, primarily through patents, trade secrets, and confidentiality agreements. Patent issuance, scope, validity, and enforceability are highly uncertain and subject to challenges, potentially leading to loss of exclusivity or narrowed protection[265](index=265&type=chunk)[266](index=266&type=chunk)[267](index=267&type=chunk) - Legal proceedings to enforce or defend IP rights can be expensive and time-consuming, diverting management resources. Third-party claims of infringement or misappropriation could prevent or delay development and commercialization, potentially requiring substantial damages or licenses on unfavorable terms[280](index=280&type=chunk)[282](index=282&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk) - Protecting IP rights globally is challenging and expensive, as foreign laws may not offer the same protection as U.S. laws. Confidentiality agreements may not prevent unauthorized disclosure of trade secrets, and the company may face claims of misappropriation from former employers of its personnel[288](index=288&type=chunk)[289](index=289&type=chunk)[292](index=292&type=chunk)[294](index=294&type=chunk) [Risks related to our business and industry](index=63&type=section&id=Risks%20related%20to%20our%20business%20and%20industry) - Failure to attract and retain senior management and key scientific personnel could impede R&D and commercialization objectives, given intense competition for skilled talent in the biotechnology industry[300](index=300&type=chunk)[301](index=301&type=chunk) - Managing growth and expanding operations successfully will be challenging, requiring effective management of development efforts, clinical studies, and hiring/training additional personnel[302](index=302&type=chunk) - The company's activities are subject to extensive healthcare, anti-corruption, data privacy, and consumer protection laws. Non-compliance could result in substantial penalties, reputational harm, and operational restructuring. Employee misconduct also poses risks of regulatory sanctions and financial impact[303](index=303&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) - Product liability lawsuits could result in substantial liabilities and limit commercialization. The company's current insurance coverage may not be sufficient for all potential claims[310](index=310&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk) [Risks related to our common stock](index=68&type=section&id=Risks%20related%20to%20our%20common%20stock) - The company's stock price has been and may continue to be volatile due to various factors, including clinical study results, regulatory developments, financial performance, and general market conditions, potentially leading to substantial losses for stockholders[321](index=321&type=chunk)[323](index=323&type=chunk) - Principal stockholders and management own a significant percentage of the stock, allowing them to exercise substantial influence over matters requiring stockholder approval, which could entrench management or discourage acquisitions[324](index=324&type=chunk) - The company does not expect to pay cash dividends in the foreseeable future, requiring investors to rely on stock price appreciation for returns. Anti-takeover provisions in corporate documents and Delaware law could discourage acquisitions, even if beneficial to stockholders[325](index=325&type=chunk)[326](index=326&type=chunk)[329](index=329&type=chunk) [General risk factors](index=72&type=section&id=General%20risk%20factors) - The ongoing COVID-19 pandemic poses significant risks, including potential delays in clinical studies, disruptions to the supply chain, impacts on employee productivity, and slower regulatory review. The ultimate impact remains highly uncertain[332](index=332&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk) - The business is vulnerable to serious disasters (e.g., floods, fires, epidemics) that could disrupt operations and lead to increased costs or liabilities, potentially exceeding insurance coverage[335](index=335&type=chunk)[336](index=336&type=chunk) - Unfavorable global economic conditions could adversely affect the business by weakening demand for products, impacting the ability to raise capital, and straining suppliers[337](index=337&type=chunk) [Item 6. Exhibits](index=74&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, agreements, certifications, and iXBRL financial information - Exhibits include the Fifth Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, Eighth Lease Modification Agreement, Offer Letters, Rule 13a-14(a)/15d-14(a) Certifications, Section 1350 Certifications, and financial information in iXBRL format[339](index=339&type=chunk) [Signatures](index=75&type=section&id=Signatures) This section contains the signatures of authorized representatives of Mersana Therapeutics, Inc., certifying the report's filing - The report is duly signed on behalf of Mersana Therapeutics, Inc. by Anna Protopapas, President and Chief Executive Officer, and Brian DeSchuytner, Senior Vice President, Finance & Product Strategy, on May 10, 2021[341](index=341&type=chunk)[343](index=343&type=chunk)

Financial Data and Key Metrics Changes - The company ended 2020 with $255 million in cash and cash equivalents, with net cash used in operating activities in Q4 2020 amounting to $17.3 million [44] - Research and development expenses for Q4 2020 were approximately $22.9 million, up from $12.4 million in Q4 2019, primarily due to increased clinical expenses for UpRi and XMT-1592 [46] - General and administrative expenses for Q4 2020 were approximately $5.9 million, compared to $4.2 million in Q4 2019, driven by increased consulting fees and facility-related costs [47] - The net loss for Q4 2020 was $28.8 million, or $0.42 per share, compared to a net loss of $16.2 million, or $0.34 per share, in the same period of 2019 [48] Business Line Data and Key Metrics Changes - The company is focused on building UpRi and expanding its innovative pipeline, with plans to initiate the UPLIFT study for UpRi in March 2021 [12][19] - The pipeline includes two NaPi2b targeted agents in lung adenocarcinoma, UpRi and XMT-1592, with ongoing evaluations [27] - XMT-1660 and XMT-2056 are expected to advance into clinical studies early in 2022 [28][40] Market Data and Key Metrics Changes - The company aims to establish UpRi as a foundational medicine in ovarian cancer, targeting heavily pretreated patients with unmet medical needs [11][17] - The UPLIFT study is designed to enroll platinum-resistant patients who have received up to four lines of therapy, differentiating it from other studies [20] Company Strategy and Development Direction - The company aspires to become a leader in antibody-drug conjugates (ADCs) by leveraging innovative platforms to address high unmet medical needs in cancer treatment [11] - The strategic focus for 2021 includes building UpRi and expanding the pipeline, with a goal of achieving significant enrollment in pivotal studies and launching the first commercial ADC [14][50] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the momentum behind UpRi and the potential for substantial enrollment in the UPLIFT study within a year [60] - The company is focused on getting UPLIFT up and running while also preparing for lifecycle management studies to enhance UpRi's market position [72] Other Important Information - The company is finalizing the cutoff for higher NaPi2b expression and plans to share data related to this as part of its diagnostic strategy [86] - The potential for using UpRi as a maintenance therapy is under consideration, with a focus on maximizing patient benefits [102] Q&A Session Summary Question: Expected timelines for UPLIFT trial enrollment and data readout - Management is optimistic about enrollment momentum but refrained from providing specific guidance at this time [60] Question: Will there be separate top-line data readouts for higher NaPi2b population and overall population? - Both endpoints are expected to be reported at the same time [62] Question: What is the bar for a go/no-go decision in lung cancer? - The decision will be based on the totality of data, including activity and tolerability profiles [67] Question: Current enrollment in ongoing expansion cohorts and future data disclosures - Enrollment momentum is encouraging, and data disclosures will be considered as the expansion cohort transitions to UPLIFT [72] Question: Companion versus complimentary diagnostic approaches - Companion diagnostics are used to identify patients for treatment, while complimentary diagnostics provide supportive information without being mandatory [82] Question: Will UPGRADE study focus on finding a combination for future pivotal studies? - The design of confirmatory trials is being finalized, with a focus on earlier lines of therapy [83] Question: Potential for maintenance therapy in UPGRADE study - The possibility of maintenance therapy is under consideration, with a focus on maximizing patient benefits [102]

Part I [Business](index=4&type=section&id=ITEM%201.%20BUSINESS) Mersana Therapeutics is a clinical-stage biopharmaceutical company developing antibody-drug conjugates for cancer, leveraging proprietary platforms and strategic partnerships [Overview and Strategy](index=4&type=section&id=Overview%20and%20Strategy) Mersana's strategy focuses on advancing lead ADC candidates, expanding its pipeline with innovative platforms, and forming strategic partnerships to address unmet cancer needs - The company's primary goal is to become a leading oncology company by developing and commercializing ADC product candidates that address unmet medical needs[18](index=18&type=chunk) - Key strategic components include rapidly advancing **UpRi** and **XMT-1592** through clinical trials, expanding the pipeline with new candidates like **XMT-1660** and **XMT-2056**, and building strategic partnerships[18](index=18&type=chunk) [Our Technologies and Platforms](index=6&type=section&id=Our%20Technologies%20and%20Platforms) Mersana's proprietary ADC platforms, including DolaLock, Dolaflexin, Dolasynthen, and Immunosynthen, enhance efficacy, control bystander effects, and enable precise drug-to-antibody ratios - The **DolaLock** payload is a proprietary auristatin designed to control the bystander effect, enhancing safety and efficacy[23](index=23&type=chunk) - The **Dolaflexin** platform utilizes a Fleximer polymer to achieve a high drug-to-antibody ratio (DAR) of approximately **10**, expanding addressable tumor targets[26](index=26&type=chunk)[27](index=27&type=chunk) - The **Dolasynthen** platform enables precise control of DAR (from **2-24**) and site-specific bioconjugation for ADC optimization[28](index=28&type=chunk)[31](index=31&type=chunk) - The **Immunosynthen** platform is designed for targeted stimulation of the innate immune system by delivering a novel STING agonist[30](index=30&type=chunk)[31](index=31&type=chunk) [Our Product Candidates](index=9&type=section&id=Our%20product%20candidates) Mersana's pipeline features lead candidates **UpRi** and **XMT-1592** in clinical trials for ovarian cancer and NSCLC, alongside preclinical programs **XMT-1660** and **XMT-2056** Mersana's Product Pipeline Status | ADC Program | Target | Indication | Platform | Discovery | Preclinical | P1 Dose Escalation | P1 Proof of Concept | |---|---|---|---|---|---|---|---| | **upifitamab rilsodotin (UpRi)** | NaPi2b | Ovarian Cancer, NSCLC | Dolaflexin | ✓ | ✓ | ✓ | ✓ | | **XMT-1592** | NaPi2b | Ovarian Cancer, NSCLC | Dolasynthen | ✓ | ✓ | ✓ | | | **XMT-1660** | B7-H4 | Multiple Solid Tumors | Dolasynthen | ✓ | ✓ | | | | **XMT-2056** | Undisclosed | Undisclosed | Immunosynthen | ✓ | ✓ | | | - **UpRi (XMT-1536)** received FDA Fast Track Designation in August 2020, with plans to initiate the **UPLIFT** registration study and **UPGRADE** combination study in 2021[41](index=41&type=chunk)[43](index=43&type=chunk) - **XMT-1592**, a Dolasynthen ADC, is in a Phase 1 dose escalation study for ovarian cancer and NSCLC, showing **four times greater efficacy** than UpRi in a preclinical lung tumor model[44](index=44&type=chunk)[46](index=46&type=chunk) - Early-stage programs include **XMT-1660** (B7-H4 targeted) and **XMT-2056** (Immunosynthen STING-agonist ADC), both in IND-enabling studies[47](index=47&type=chunk)[49](index=49&type=chunk) [Unmet Need and Epidemiology](index=13&type=section&id=Unmet%20Need%20and%20Epidemiology) Mersana targets ovarian cancer and NSCLC, both with significant unmet needs due to low response rates and limited treatment options for advanced or recurrent disease - Ovarian cancer, especially in platinum-resistant patients, presents a significant unmet need with single-agent chemotherapy response rates of only **4-12%**[51](index=51&type=chunk) - NSCLC is the deadliest cancer in the U.S., with a five-year survival rate below **20%**, and recurrent disease shows standard care response rates of **14-23%**[53](index=53&type=chunk)[54](index=54&type=chunk) [Strategic Partnerships](index=14&type=section&id=Strategic%20Partnerships) Mersana leverages strategic partnerships with Merck KGaA and Asana Biosciences, and in-licenses key IP from Recepta and Synaffix to advance its ADC platforms and pipeline - A collaboration with **Merck KGaA** for up to six ADC targets could yield up to **$777 million** in future milestones plus royalties, with **$15 million** already received[57](index=57&type=chunk)[58](index=58&type=chunk)[59](index=59&type=chunk) - The company licensed the **NaPi2b antibody** for **UpRi** and **XMT-1592** from **Recepta Biopharma**, with potential milestones up to **$65.5 million** and tiered royalties[63](index=63&type=chunk)[64](index=64&type=chunk) - A commercial license with **Synaffix** provides site-specific conjugation technology for six targets, including **XMT-1592**, with potential milestones up to **$24.8 million** for the first target[66](index=66&type=chunk) [Manufacturing](index=16&type=section&id=Manufacturing) Mersana relies entirely on third-party Contract Manufacturing Organizations for all product candidate production, lacking in-house facilities or alternate commercial suppliers - The company relies entirely on **third-party Contract Manufacturing Organizations (CMOs)** for all product candidate manufacturing, with no plans for in-house facilities[68](index=68&type=chunk) - Supply chains for **UpRi** and **XMT-1592** use commercialization-capable vendors, though one component for **XMT-1592** still requires a qualified commercial vendor[68](index=68&type=chunk) [Government Regulation](index=16&type=section&id=Government%20Regulation) Mersana's operations are extensively regulated by the FDA and international authorities, covering all stages from R&D and clinical trials to manufacturing, marketing approval, and post-market compliance - In the U.S., ADC product candidates are regulated as biologics by the **FDA**, requiring a comprehensive process from preclinical studies to a **Biologics License Application (BLA)** for marketing approval[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The **FDA** offers expedited programs like **Fast Track**, **Breakthrough Therapy**, and **Priority Review**, and the company may utilize **Accelerated Approval** based on surrogate endpoints[87](index=87&type=chunk)[88](index=88&type=chunk)[91](index=91&type=chunk) - The company's activities are subject to numerous healthcare laws, including federal anti-kickback statutes, false claims acts, **HIPAA**, and the **Sunshine Act**[127](index=127&type=chunk)[293](index=293&type=chunk) - Operations are also subject to data privacy laws such as **GDPR** in Europe and **CCPA** in California, governing personal data processing and imposing significant penalties[119](index=119&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) [Intellectual Property](index=28&type=section&id=Intellectual%20Property) Mersana protects its technology through patents and trade secrets, holding 21 issued U.S. patents and in-licensing critical IP for its platforms and product candidates like **UpRi** and **XMT-1592** - As of January 31, 2021, the company owned **21 issued U.S. patents**, **12 pending U.S. applications**, **95 issued foreign patents**, and **102 pending foreign applications**[144](index=144&type=chunk) Key Patent Portfolio Expiration Dates | Platform/Product | U.S. Patent Status | Projected Expiration (excluding extensions) | |---|---|---| | Fleximer ADC Platform | 10 issued U.S. patents | 2032 | | Dolaflexin ADC Platform | 2 issued U.S. patents | 2034 and 2038 | | UpRi ADC | Pending applications | 2037 - 2039 | | Dolasynthen ADC Platform | Pending applications | 2037 - 2039 | | XMT-1592 ADC | Pending applications | 2041 | | Immunosynthen Platform | Pending applications | 2040 - 2041 | - The company exclusively in-licensed **four issued U.S. patents** and **one issued European patent** for the **NaPi2b antibody** from **Recepta**, projected to expire in **2029**[150](index=150&type=chunk) [Competition](index=32&type=section&id=Competition) Mersana faces intense competition in the biopharmaceutical and oncology sectors from large pharmaceutical and biotech firms developing various cancer treatments, including ADCs - The company faces substantial competition from large biopharmaceutical companies, specialty biotech firms, and academic institutions in the oncology space[156](index=156&type=chunk) - Key competitors in the ADC technology space include **Daiichi Sankyo**, **ImmunoGen**, **Gilead (Immunomedics)**, **Pfizer**, and **SeaGen**, among others[157](index=157&type=chunk)[248](index=248&type=chunk) [Employees, Human Capital, and Facilities](index=32&type=section&id=Employees%2C%20Human%20Capital%2C%20and%20Facilities) As of January 31, 2021, Mersana had 110 employees, primarily in R&D, operating from a 35,000 square foot leased facility in Cambridge, Massachusetts - As of January 31, 2021, the company had **110 full-time employees**, with **87** in R&D[159](index=159&type=chunk) - The company's corporate headquarters are in a leased **35,000 square foot** office and laboratory space in Cambridge, Massachusetts[161](index=161&type=chunk)[332](index=332&type=chunk) [Risk Factors](index=33&type=section&id=ITEM%201A.%20RISK%20FACTORS) Mersana faces significant risks including high clinical development failure rates, financial losses, reliance on third parties, commercialization challenges, intellectual property protection issues, and operational disruptions - **Development Risks:** Early positive results for **UpRi** and other candidates are not predictive of future success, and clinical trials may fail to demonstrate safety and efficacy[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - **Financial Risks:** The company reported a net loss of **$88.0 million** in 2020, expects continued losses, and will require significant additional financing[198](index=198&type=chunk)[203](index=203&type=chunk) - **Third-Party Reliance:** The company depends on third-party **CMOs** for manufacturing and **CROs** for clinical trials, exposing it to supply, quality, and data integrity risks[212](index=212&type=chunk)[217](index=217&type=chunk) - **Commercialization Risks:** Future success depends on market acceptance, adequate reimbursement, and building sales infrastructure, with potential for smaller-than-estimated market opportunities[230](index=230&type=chunk)[233](index=233&type=chunk)[239](index=239&type=chunk) - **Intellectual Property Risks:** Success depends on obtaining and defending patents, which is uncertain and subject to challenges, invalidation, or insufficient protection[253](index=253&type=chunk)[254](index=254&type=chunk) - **Pandemic Risk:** The **COVID-19** pandemic poses risks of disruption to clinical trials, manufacturing, regulatory timelines, and capital raising ability[323](index=323&type=chunk)[324](index=324&type=chunk)[325](index=325&type=chunk) [Unresolved Staff Comments](index=72&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the SEC - None[331](index=331&type=chunk) [Properties](index=72&type=section&id=ITEM%202.%20PROPERTIES) The company's corporate headquarters and laboratory are located in a leased 35,000 square foot facility in Cambridge, Massachusetts - The company leases approximately **35,000 square feet** of office and laboratory space for its headquarters in Cambridge, Massachusetts[332](index=332&type=chunk) [Legal Proceedings](index=72&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is not currently a party to any material legal proceedings - The company is not currently party to any material legal proceedings[333](index=333&type=chunk) [Mine Safety Disclosures](index=72&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company - Not applicable[334](index=334&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=73&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on Nasdaq under 'MRSN', with no plans for cash dividends, retaining earnings for business growth - The company's common stock trades on The Nasdaq Global Select Market under the symbol '**MRSN**'[337](index=337&type=chunk) - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[338](index=338&type=chunk) [Selected Financial Data](index=74&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) The company reported a net loss of **$88.0 million** in 2020, a significant increase from 2019, primarily due to decreased collaboration revenue, while total assets grew to **$273.4 million** Selected Historical Financial Data (in thousands, except per share data) | | 2020 | 2019 | 2018 | 2017 | 2016 | |---|---:|---:|---:|---:|---:| | **Statements of Operations Data:** | | | | | | | Collaboration revenue | $828 | $42,123 | $10,594 | $17,545 | $25,171 | | Research and development | $67,036 | $55,040 | $59,915 | $46,700 | $32,008 | | General and administrative | $21,902 | $17,283 | $16,334 | $10,462 | $6,984 | | Net loss | $(88,045) | $(28,208) | $(64,257) | $(38,707) | $(13,700) | | Net loss per share | $(1.43) | $(0.65) | $(2.79) | $(3.22) | $(10.82) | | **Balance Sheet Data (End of Period):** | | | | | | | Cash, cash equivalents and marketable securities | $255,094 | $99,790 | $70,131 | $125,216 | $100,297 | | Total assets | $273,399 | $107,541 | $78,502 | $130,715 | $105,087 | | Total stockholders' equity (deficit) | $228,087 | $78,318 | $8,795 | $69,994 | $(55,619) | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=75&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Mersana's net loss increased to **$88.0 million** in 2020 due to decreased collaboration revenue and higher R&D, but liquidity significantly improved to **$255.1 million** cash from equity offerings [Results of Operations](index=80&type=section&id=Results%20of%20Operations) In 2020, collaboration revenue significantly decreased to **$0.8 million** due to Takeda agreement termination, while R&D and G&A expenses increased, leading to a higher net loss Comparison of Operations (2020 vs. 2019, in thousands) | | 2020 | 2019 | Dollar Change | |---|---:|---:|---:| | Collaboration revenue | $828 | $42,123 | $(41,295) | | Research and development | $67,036 | $55,040 | $11,996 | | General and administrative | $21,902 | $17,283 | $4,619 | | **Net loss** | **$(88,045)** | **$(28,208)** | **$(59,837)** | - The significant decrease in 2020 collaboration revenue was primarily due to the **$40.0 million** one-time recognition of deferred revenue in 2019 from the termination of the Takeda agreements[377](index=377&type=chunk) - The **$12.0 million** increase in R&D expense in 2020 was driven by a **$9.2 million** increase in **UpRi** manufacturing and clinical activities and a **$4.3 million** increase in employee compensation[378](index=378&type=chunk) [Liquidity and Capital Resources](index=83&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, the company had **$255.1 million** in cash, significantly bolstered by **$164.0 million** from a follow-on offering and **$63.0 million** from its ATM program, sufficient for two years - The company ended 2020 with **$255.1 million** in cash and cash equivalents[391](index=391&type=chunk) - Major financing activities in 2020 included raising net proceeds of **$164.0 million** from a follow-on offering and **$63.0 million** from the ATM program[388](index=388&type=chunk) Cash Flow Summary (in thousands) | | 2020 | 2019 | 2018 | |---|---:|---:|---:| | Net cash used in operating activities | $(74,696) | $(67,744) | $(55,216) | | Net cash provided by (used in) investing activities | $37,027 | $(27,293) | $87,195 | | Net cash provided by financing activities | $230,412 | $97,704 | $1,064 | - The company believes its available funds are sufficient to fund its operating plan for approximately the next **two years**[398](index=398&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=89&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate sensitivity on its investment portfolio, deemed immaterial due to its short-term, low-risk nature, with no significant foreign currency risk - The primary market risk is interest rate sensitivity on its investment portfolio[427](index=427&type=chunk) - The company is not currently exposed to material foreign currency exchange rate risk[428](index=428&type=chunk) [Financial Statements and Supplementary Data](index=90&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the company's audited consolidated financial statements for 2018-2020, including balance sheets, statements of operations, equity, and cash flows, with an unqualified opinion from Ernst & Young LLP [Consolidated Financial Statements](index=93&type=section&id=Consolidated%20Financial%20Statements) From 2019 to 2020, total assets increased to **$273.4 million** driven by cash, total liabilities rose to **$45.3 million**, and the net loss grew to **$88.0 million** Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | |---|---:|---:| | Cash and cash equivalents | $255,094 | $62,351 | | Total current assets | $258,580 | $101,326 | | Total assets | $273,399 | $107,541 | | Total current liabilities | $30,003 | $24,070 | | Total liabilities | $45,312 | $29,223 | | Total stockholders' equity | $228,087 | $78,318 | Consolidated Statement of Operations Highlights (in thousands) | | 2020 | 2019 | 2018 | |---|---:|---:|---:| | Collaboration revenue | $828 | $42,123 | $10,594 | | Total operating expenses | $88,938 | $72,323 | $76,249 | | Net loss | $(88,045) | $(28,208) | $(64,257) | [Notes to Consolidated Financial Statements](index=97&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, including 2019 revenue from Takeda termination, the **$30.0 million** SVB debt facility, **$227.0 million** raised from 2020 equity offerings, and a full valuation allowance against deferred tax assets - **Collaboration Agreements (Note 3):** The company recognized **$0.8 million** in revenue from its **Merck KGaA** agreement in 2020, and **$40.0 million** in 2019 from the termination of **Takeda** agreements[530](index=530&type=chunk)[535](index=535&type=chunk) - **Debt (Note 8):** In August 2020, the company amended its credit facility with **Silicon Valley Bank** for up to **$30.0 million**, with **$5.2 million** outstanding as of December 31, 2020[553](index=553&type=chunk)[561](index=561&type=chunk) - **Stockholders' Equity (Note 9):** In 2020, the company raised net proceeds of approximately **$63.0 million** through its ATM program and **$164.0 million** from a follow-on public offering[565](index=565&type=chunk)[566](index=566&type=chunk) - **Income Taxes (Note 12):** The company has significant net operating loss (NOL) carryforwards (**$250.4 million** federal, **$184.8 million** state) but recorded a full valuation allowance of **$77.4 million** against deferred tax assets[598](index=598&type=chunk)[599](index=599&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=122&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[614](index=614&type=chunk) [Controls and Procedures](index=122&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with an unqualified auditor opinion - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[616](index=616&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the **COSO 2013** framework[619](index=619&type=chunk) - The independent registered public accounting firm, **Ernst & Young LLP**, provided an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2020[620](index=620&type=chunk)[624](index=624&type=chunk) [Other Information](index=124&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company reports no other information for this item - None[631](index=631&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=125&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[633](index=633&type=chunk) [Executive Compensation](index=125&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[634](index=634&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=125&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[635](index=635&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=125&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[636](index=636&type=chunk) [Principal Accounting Fees and Services](index=125&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTING%20FEES%20AND%20SERVICES) Information for this item is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement - Information is incorporated by reference from the 2021 Annual Meeting of Stockholders proxy statement[637](index=637&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=126&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the consolidated financial statements included in the report and notes that no financial statement schedules have been submitted as they are not required or applicable - The consolidated financial statements are included in the report[640](index=640&type=chunk) - No financial statement schedules have been submitted[641](index=641&type=chunk) [Form 10-K Summary](index=126&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) The company reports no summary for this item - None[643](index=643&type=chunk)