May 9, 2024 Mersana may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements, and you should not place undue reliance on these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements as a result of various factors, including, among other things, uncertainties inherent in research and development, in the initiation and advancement of clinical trial ...

Exhibit 99.1 Mersana Therapeutics Provides Business Update and Announces First Quarter 2024 Financial Results CAMBRIDGE, Mass., May 9, 2024 – Mersana Therapeutics, Inc. (NASDAQ: MRSN), a clinical-stage biopharmaceutical company focused on discovering and developing a pipeline of antibody-drug conjugates (ADCs) targeting cancers in areas of high unmet medical need, today provided a business update and reported financial results for the first quarter ended March 31, 2024. "In recent months, we presented new p ...

CAMBRIDGE, Mass., May 03, 2024 (GLOBE NEWSWIRE) -- Mersana Therapeutics, Inc. (NASDAQ:MRSN), a clinical-stage biopharmaceutical company focused on discovering and developing a pipeline of antibody-drug conjugates (ADCs) targeting cancers in areas of high unmet medical need, today announced that on May 1, 2024, an authorized sub-committee of the Board of Directors of Mersana granted an inducement award, consisting of a restricted stock unit (RSU) award to acquire 35,100 shares of its common stock, to one new ...

CAMBRIDGE, Mass., May 02, 2024 (GLOBE NEWSWIRE) -- Mersana Therapeutics, Inc. (NASDAQ:MRSN), a clinical-stage biopharmaceutical company focused on discovering and developing a pipeline of antibody-drug conjugates (ADCs) targeting cancers in areas of high unmet medical need, today announced that it will provide business updates and report its financial results for the first quarter ended March 31, 2024 on Thursday, May 9, 2024. The company will host a conference call and webcast at 8:00 a.m. Eastern Time tha ...

Financial Data and Key Metrics - Collaboration revenue for Q4 2023 was $10.7 million, down from $14.7 million in Q4 2022, primarily due to the timing of research activities and the achievement of an early development milestone with Johnson & Johnson in Q4 2022 [10] - General and administrative expenses for Q4 2023 were $10.1 million, compared to $14.8 million in Q4 2022, with $1.9 million in non-cash stock-based compensation expenses included [11] - Research and development expenses for Q4 2023 were $21.5 million, down from $45.7 million in Q4 2022, driven by reduced manufacturing and clinical costs related to UpRi and XMT-2056, and lower employee compensation costs [99] - Net loss for Q4 2023 was $19.5 million, compared to a net loss of $44.9 million in Q4 2022 [100] - The company ended Q4 2023 with approximately $209 million in cash, cash equivalents, and marketable securities, with net cash used in operating activities at $32 million, down significantly from prior quarters due to restructuring and UpRi wind-down efforts [98] Business Line Data and Key Metrics - The company is advancing its Dolasynthen ADC platform, with XMT-1660 (B7-H4 targeting ADC) in Phase 1 trials, currently at a dose of 59 mg/m², the highest dose investigated clinically with Dolasynthen ADC [6][81] - XMT-2056, the lead Immunosynthen ADC targeting HER2, is in the process of restarting its Phase 1 trial after a clinical hold by the FDA in Q4 2023 [70] - The company has collaboration agreements with Johnson & Johnson, Merck KGaA, and GSK, focusing on maximizing the potential of its ADC platforms and product candidates [8] Market Data and Key Metrics - The company is targeting solid tumors, including triple-negative breast cancer, estrogen receptor-positive breast cancer, ovarian cancer, and endometrial cancer, with XMT-1660 [68] - For XMT-2056, the company plans to enroll patients with HER2-positive tumors, including breast, gastric, colorectal, and non-small cell lung cancer [70] Company Strategy and Industry Competition - The company aims to minimize dose-limiting platform toxicities, avoid resistance mechanisms, and extend ADC therapies beyond cytotoxics to include targeted innate immune responses [3][4] - The Dolasynthen platform is designed to avoid dose-limiting neutropenia and peripheral neuropathy associated with other ADC platforms, such as vcMMAE [57][66] - The company believes its Immunosynthen platform, which harnesses STING, could be the next significant frontier for ADCs, offering potential for combination therapies with other standard-of-care treatments [7][113] Management Commentary on Operating Environment and Future Outlook - The company is optimistic about its differentiated ADC platforms and upcoming data readouts, particularly for XMT-1660, and believes its cash runway will support operations into 2026 [97][72] - Management highlighted the urgent unmet need for new ADCs with alternative payloads, as resistance to TOPO1-ADC treatments is emerging in breast cancer patients [69] Other Important Information - The company will present clinical data for discontinued candidates UpRi and XMT-1592 at the European Society of Gynecological Oncology (ESGO) conference, with 31 patients in the XMT-1592 dataset [5][114] - The company is exploring alternative dosing schedules for XMT-1660, including Q3 and Q4 schedules, to optimize dosing [81] Q&A Session Summary Question: Decision-making process behind the second-gen NaPi2b program and lessons for B7-H4 program [15] - The decision to reprioritize XMT-1592 was driven by the lower prevalence of the NaPi2b biomarker in lung cancer compared to ovarian cancer, as well as cost considerations [79][16] - For B7-H4, the company has not observed pneumonitis, which was associated with NaPi2b, and is continuing to optimize dosing and enrollment [80][81] Question: Enrollment progress and dose optimization for B7-H4 study [15] - The company has escalated to a dose of 59 mg/m² for XMT-1660 and is continuing to enroll patients in backfill cohorts to optimize dosing [81] Question: Expectations for midyear 1660 update and takeaways from 1592 data [101] - The midyear update for XMT-1660 will include efficacy and safety data, with the company highlighting the absence of peripheral neuropathy, neutropenia, and ocular toxicity observed in XMT-1592 [13][14] Question: Cash runway and expense trajectory [54] - The company expects its cash runway to support operations into 2026, with reduced OpEx in Q4 2023 and the completion of UpRi wind-down efforts [34][72] Question: B7-H4 biomarker and potential biomarker data in midyear update [41] - The company is measuring B7-H4 at baseline but not preselecting patients based on it, and has not decided whether to share biomarker data in the midyear update [128] Question: Differentiation and positioning of XMT-1660 compared to peers [133] - The company believes its Dolasynthen platform offers advantages in terms of lower toxicity and potential for combination therapies, with a focus on triple-negative breast cancer and other solid tumors [123][135] Question: Restarting the XMT-2056 trial and GSK's involvement [111] - The company is in the process of restarting the XMT-2056 trial, with GSK engaged but not having exercised its option, leaving decision-making control with the company [86][109] Question: Duration of response and resistance mechanisms in breast cancer [30][52] - The company is cautious about interpreting duration of response in Phase 1 data but notes that patients who responded to UpRi had a duration of response over seven months [31][137] - The company is enrolling patients who have received prior TOPO ADCs to assess resistance mechanisms and the efficacy of XMT-1660 [60][52]

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, 2023. 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 ...

Exhibit 99.1 Mersana Therapeutics Provides Business Update and Announces Fourth Quarter and Full Year 2023 Financial Results CAMBRIDGE, Mass., February 28, 2024 – Mersana Therapeutics, Inc. (NASDAQ: MRSN), a clinical-stage biopharmaceutical company focused on discovering and developing a pipeline of antibody-drug conjugates (ADCs) targeting cancers in areas of high unmet medical need, today provided a business update and reported financial results for the fourth quarter and full year ended December 31, 2023 ...

Financial Data and Key Metrics Changes - The company ended Q3 2023 with approximately $241 million in cash, cash equivalents, and marketable securities, down from approximately $281 million at the end of 2022 [5] - Net cash used in operating activities was approximately $46.1 million for Q3 2023, while collaboration revenue increased to $7.7 million from $5.6 million in the same period of 2022 [14][33] - Research and development expenses decreased to $30.5 million in Q3 2023 from $50.6 million in Q3 2022, primarily due to reduced manufacturing and clinical costs [14][33] - The net loss for Q3 2023 was $41.7 million, compared to a net loss of $59.8 million for the same period in 2022 [33] Business Line Data and Key Metrics Changes - The company is focusing on XMT-1660, developed using the Dolasynthen platform, which is expected to demonstrate advantages over the first-generation ADC platform [3][29] - XMT-2056, the first Immunosynthen ADC candidate, is now reinitiating enrollment after the FDA lifted the clinical hold, with a lower starting dose being implemented [31][32] Market Data and Key Metrics Changes - The company is advancing XMT-1660 in the dose escalation phase of its Phase I trial, with plans to complete dose escalation by the end of the year and dose expansion planned for 2024 [29][30] - The collaboration with Janssen focuses on discovering novel Dolasynthen ADCs for up to three targets, indicating strong market interest [30] Company Strategy and Development Direction - The company is transitioning from a previous business strategy to focus on next-generation platforms, specifically XMT-1660 and XMT-2056, which are seen as having significant potential [39] - The management emphasizes the importance of differentiating their platforms in the competitive landscape, particularly in the B7-H4 space, where they believe their technology can deliver payloads more efficiently [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's financial position and potential, highlighting the importance of their innovative platforms and strong team [2][3] - The company plans to share more about its outlook for 2024 and key upcoming milestones in January [32] Other Important Information - The company underwent a significant restructuring, including a workforce reduction of approximately 50%, to simplify its cost structure for 2024 [5] - Noncash R&D-related stock-based compensation expense for Q3 2023 was $2.2 million, and general and administrative expenses decreased to $12.9 million from $14.6 million in the same period of 2022 [33] Q&A Session Summary Question: When might we see initial XMT-1660 clinical data? - The company is making good progress in the dose escalation phase and has begun enrolling patients in backfill cohorts [7] Question: Are you changing the enrollment criteria for the STING study? - The primary change is lowering the starting dose, with minimal other changes [10] Question: Can you discuss the HER2 epitope validation for XMT-2056? - The HER2 epitope targeted by XMT-2056 is distinct from those targeted by existing therapies like pertuzumab and Herceptin [23] Question: How is the company differentiating its program in the B7-H4 landscape? - The company believes its platform can deliver payloads more efficiently and avoid severe side effects seen in other ADC programs [36] Question: What does the 2026 cash runway include? - The cash runway guidance is based on current operating plan commitments and does not assume milestone payments from collaborations [38]

[PART I – FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations and comprehensive loss, statements of stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's financial position, performance, and significant accounting policies [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet shows a decrease in total assets and total stockholders' equity from December 31, 2022, to September 30, 2023, primarily driven by a reduction in marketable securities and an increase in accumulated deficit, despite an increase in cash and cash equivalents | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $186,283 | $128,885 | | Short-term marketable securities | $54,703 | $151,827 | | Accounts receivable | $— | $30,000 | | Total current assets | $249,738 | $319,219 | | Total assets | $262,904 | $334,340 | | Total current liabilities | $67,933 | $91,533 | | Total liabilities | $210,709 | $242,283 | | Total stockholders' equity | $52,195 | $92,057 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a reduced net loss for both the three and nine months ended September 30, 2023, compared to the prior year, driven by increased collaboration revenue and decreased research and development expenses, despite new restructuring expenses | Metric | Three Months Ended Sep 30, 2023 (in thousands) | Three Months Ended Sep 30, 2022 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Collaboration revenue | $7,698 | $5,573 | $26,154 | $11,893 | | Research and development | $30,531 | $50,639 | $126,774 | $127,676 | | General and administrative | $12,894 | $14,573 | $49,409 | $42,158 | | Restructuring expenses | $8,214 | $— | $8,214 | $— | | Total operating expenses | $51,639 | $65,212 | $184,397 | $169,834 | | Net loss | $(41,656) | $(59,811) | $(152,126) | $(159,288) | | Net loss per share (basic and diluted) | $(0.35) | $(0.61) | $(1.33) | $(1.75) | [Condensed Consolidated Statements of Stockholders' Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Stockholders' equity decreased from December 31, 2022, to September 30, 2023, primarily due to the accumulated net loss, despite increases in common stock and additional paid-in capital from equity offerings | Metric | September 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | Common stock (shares) | 120,548,980 | 105,144,864 | | Additional paid-in capital | $858,999 | $746,889 | | Accumulated deficit | $(806,817) | $(654,691) | | Total stockholders' equity | $52,195 | $92,057 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, net cash used in operating activities increased significantly, but was offset by a substantial increase in cash provided by investing activities (primarily marketable securities maturities) and continued cash generation from financing activities, resulting in an overall increase in cash and cash equivalents | Cash Flow Activity | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(136,920) | $1,866 | | Net cash provided by (used in) investing activities | $99,735 | $(107,290) | | Net cash provided by financing activities | $94,583 | $111,559 | | Increase in cash, cash equivalents and restricted cash | $57,398 | $6,135 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures and explanations for the condensed consolidated financial statements, covering the company's business, accounting policies, collaboration agreements, fair value measurements, cash and marketable securities, accrued expenses, debt, stockholders' equity, stock-based compensation, net loss per share, commitments, and recent restructuring activities [Note 1. Nature of business and basis of presentation](index=12&type=section&id=Note%201.%20Nature%20of%20business%20and%20basis%20of%20presentation) Mersana Therapeutics is a clinical-stage biopharmaceutical company focused on developing Antibody-Drug Conjugates (ADCs) for cancer, leveraging its Dolasynthen and Immunosynthen platforms. The company has incurred significant net losses since inception, with an accumulated deficit of $806.8 million as of September 30, 2023, and expects to continue incurring operating losses for the foreseeable future - Company is a clinical-stage biopharmaceutical company developing ADCs for cancer, utilizing proprietary Dolasynthen and Immunosynthen platforms[29](index=29&type=chunk) - Key product candidates include XMT-1660 (Dolasynthen ADC in Phase 1) and XMT-2056 (Immunosynthen STING-agonist ADC in Phase 1, clinical hold lifted in October 2023)[30](index=30&type=chunk) - The UpRi program was discontinued following the failure of its Phase 2 UPLIFT clinical trial to meet its primary endpoint, leading to winding down of related development activities[31](index=31&type=chunk) | Metric | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(41.7) million | $(59.8) million | $(152.1) million | $(159.3) million | | Accumulated Deficit (as of Sep 30, 2023) | | | $(806.8) million | | [Note 2. Summary of significant accounting policies](index=13&type=section&id=Note%202.%20Summary%20of%20significant%20accounting%20policies) The company's unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, consolidating its wholly-owned subsidiary. Management makes estimates for revenue recognition, accrued expenses, and stock-based awards. The company operates as a single segment and uses a three-level fair value hierarchy for financial instruments, primarily classifying cash equivalents and marketable securities as Level 1 or Level 2 - The company operates and manages its business as a **single operating segment** focused on discovering and developing ADCs[41](index=41&type=chunk) - Fair value measurements are categorized into a three-level hierarchy: **Level 1** for quoted prices in active markets, **Level 2** for observable inputs for similar assets/liabilities, and **Level 3** for unobservable inputs[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - Cash equivalents are highly-liquid investments with original or remaining maturities of **three months or less**, primarily in money market funds, commercial paper, and government agency securities[48](index=48&type=chunk) [Note 3. Collaboration agreements](index=15&type=section&id=Note%203.%20Collaboration%20agreements) The company has significant collaboration agreements with GSK, Janssen, and Merck KGaA, generating revenue from upfront fees, development activities, and milestones. Deferred revenue from these agreements represents substantial unsatisfied performance obligations - GSK Agreement (August 2022) includes a **$100.0 million upfront fee** and a potential **$90.0 million option exercise payment** for XMT-2056[51](index=51&type=chunk)[52](index=52&type=chunk) - Janssen Agreement (February 2022) involved a **$40.0 million upfront payment**, with a revised total transaction price of **$48.0 million** as of September 30, 2023[59](index=59&type=chunk)[65](index=65&type=chunk) - 2022 Merck KGaA Agreement (December 2022) provided a **$30.0 million upfront payment** for Immunosynthen platform ADCs[70](index=70&type=chunk) | Collaboration | Q3 2023 Revenue (in thousands) | Q3 2022 Revenue (in thousands) | 9M 2023 Revenue (in thousands) | 9M 2022 Revenue (in thousands) | | :--- | :--- | :--- | :--- | :--- | | GSK Agreement | $500 | $700 | $1,800 | $700 | | Janssen Agreement | $4,900 | $4,900 | $14,000 | $10,900 | | 2022 Merck KGaA Agreement | $2,300 | $— | $7,900 | $— | | Asana BioSciences (milestone/services) | $— | $— | $2,500 | $300 | | Deferred Revenue (Contract Liabilities) | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | GSK Agreement | $96,200 | $98,000 | | Janssen Agreement | $9,900 | $15,800 | | 2022 Merck KGaA Agreement | $23,100 | $30,000 | | 2014 Merck KGaA Agreement & Supply Agreement (aggregate) | $3,900 | $3,900 | | **Total Deferred Revenue** | **$133,096** | **$147,653** | [Note 4. Fair value measurements](index=20&type=section&id=Note%204.%20Fair%20value%20measurements) The company's assets measured at fair value, primarily cash equivalents and marketable securities, are classified within Level 1 and Level 2 of the fair value hierarchy, indicating valuation based on quoted prices in active markets or observable inputs | Asset Type (in thousands) | September 30, 2023 Total | Level 1 | Level 2 | | :--- | :--- | :--- | :--- | | Money market funds | $137,795 | $137,795 | $— | | U.S. treasury securities | $29,811 | $29,811 | $— | | U.S. government agency securities | $24,892 | $— | $24,892 | | **Total Marketable Securities** | **$54,703** | **$29,811** | **$24,892** | | Asset Type (in thousands) | December 31, 2022 Total | Level 1 | Level 2 | | :--- | :--- | :--- | | Money market funds | $50,471 | $50,471 | $— | | U.S. government agency securities | $9,993 | $— | $9,993 | | **Total Cash Equivalents** | **$60,464** | **$50,471** | **$9,993** | - The carrying value of the company's long-term debt under the New Credit Facility approximated fair value (**Level 2**) as of September 30, 2023, and December 31, 2022[94](index=94&type=chunk) [Note 5. Cash, cash equivalents, and short-term marketable securities](index=21&type=section&id=Note%205.%20Cash,%20cash%20equivalents,%20and%20short-term%20marketable%20securities) The company's total cash, cash equivalents, and restricted cash increased significantly for the nine months ended September 30, 2023, while its marketable securities portfolio decreased, with some unrealized losses attributed to rising market interest rates | Metric | Nine Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2022 (in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents (beginning of period) | $128,885 | $177,947 | | Cash and cash equivalents (end of period) | $186,283 | $184,082 | | Restricted cash (beginning & end of period) | $478 | $478 | | **Total cash, cash equivalents and restricted cash (end of period)** | **$186,761** | **$184,560** | | Marketable Securities (in thousands) | September 30, 2023 Fair Value | December 31, 2022 Fair Value | | :--- | :--- | :--- | | U.S. treasury securities | $29,811 | $107,810 | | U.S. government agency securities | $24,892 | $44,017 | | **Total** | **$54,703** | **$151,827** | - As of September 30, 2023, the debt security portfolio had **$29.9 million in unrealized losses** due to market interest rate increases, with the company intending and having the ability to hold these securities until recovery[100](index=100&type=chunk) [Note 6. Accrued expenses](index=22&type=section&id=Note%206.%20Accrued%20expenses) Accrued expenses significantly decreased from $43.2 million at December 31, 2022, to $29.3 million at September 30, 2023, primarily due to reductions in accrued clinical, payroll, and manufacturing expenses, partially offset by newly accrued restructuring expenses | Accrued Expense Type (in thousands) | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Accrued clinical expenses | $8,544 | $14,822 | | Accrued payroll and related expenses | $7,168 | $11,558 | | Accrued manufacturing expenses | $4,250 | $11,536 | | Accrued restructuring expenses | $4,190 | $— | | Accrued research and non-clinical expenses | $3,062 | $2,767 | | Accrued professional fees | $1,583 | $1,865 | | Accrued other | $524 | $636 | | **Total Accrued Expenses** | **$29,321** | **$43,184** | [Note 7. Debt](index=22&type=section&id=Note%207.%20Debt) The company has drawn $25.0 million under its New Credit Facility as of September 30, 2023, with no additional borrowing amounts available. The company was in compliance with all debt covenants and reported increased interest expense for both the three and nine months ended September 30, 2023, compared to the prior year - The company has drawn **$25.0 million** under the New Credit Facility as of September 30, 2023, with no additional borrowing amounts available[103](index=103&type=chunk) - As of September 30, 2023, the company was in compliance with all covenants under the New Credit Facility[104](index=104&type=chunk) | Interest Expense (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Interest expense related to New Credit Facility | $1,017 | $880 | $3,025 | $2,364 | [Note 8. Stockholders' equity](index=23&type=section&id=Note%208.%20Stockholders'%20equity) The company's common stock authorized shares increased in June 2022. It utilized ATM equity offering programs, with the November 2022 ATM having $55.9 million remaining for sale as of September 30, 2023. All outstanding warrants expired in September 2023 - The number of authorized common stock shares increased from **175,000,000 to 350,000,000** in June 2022[112](index=112&type=chunk) - Under the November 2022 ATM, the company sold **14,208,145 shares** for net proceeds of **$92.2 million** during the nine months ended September 30, 2023, with approximately **$55.9 million remaining unsold**[110](index=110&type=chunk) - All outstanding warrants to purchase common stock expired on September 27, 2023, with none remaining as of September 30, 2023[111](index=111&type=chunk) | Shares Reserved for Issuance | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Stock options | 12,178,126 | 10,051,283 | | Restricted stock units | 4,122,365 | 1,870,791 | | Warrants | — | 22,590 | | **Total** | **16,300,491** | **11,944,664** | [Note 9. Stock-based compensation](index=24&type=section&id=Note%209.%20Stock-based%20compensation) The company's stock-based compensation expense for the nine months ended September 30, 2023, increased to $17.1 million, primarily from stock options and restricted stock units (RSUs). Significant amounts of unrecognized compensation expense remain for unvested options and RSUs - The 2017 Stock Incentive Plan had **864,450 shares available** for future issuance as of September 30, 2023, after an increase of **4,205,794 shares** on January 1, 2023[118](index=118&type=chunk) - During the nine months ended September 30, 2023, **3,972,166 stock options** and **3,982,567 RSUs** were granted[124](index=124&type=chunk)[129](index=129&type=chunk) | Stock-based Compensation Expense (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Stock options | $3,211 | $3,901 | $11,718 | $11,952 | | Restricted stock units | $694 | $1,365 | $4,647 | $3,832 | | Employee stock purchase plan | $96 | $109 | $686 | $424 | | **Total operating expenses** | **$4,001** | **$5,375** | **$17,051** | **$16,208** | - As of September 30, 2023, there was **$18.7 million of unrecognized stock-based compensation expense** for unvested stock options (weighted-average period of **1.8 years**) and **$15.1 million** for unvested RSUs (weighted-average period of **2.5 years**)[133](index=133&type=chunk) [Note 10. Net loss per share](index=28&type=section&id=Note%2010.%20Net%20loss%20per%20share) Basic and diluted net loss per share were identical for all periods presented because all potentially dilutive securities, such as stock options, unvested RSUs, and warrants, were anti-dilutive due to the company's net loss - Stock options, unvested restricted stock units, and warrants were excluded from the diluted net loss per share calculation because their effect would be anti-dilutive[138](index=138&type=chunk) | Potentially Dilutive Securities Excluded (shares) | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Stock options | 12,178,126 | 10,524,780 | | Unvested restricted stock units | 4,122,365 | 1,870,682 | | Warrants | — | 22,590 | | **Total** | **16,300,491** | **12,418,052** | [Note 11. Commitments](index=28&type=section&id=Note%2011.%20Commitments) The company recorded no research and development expense related to non-refundable license payments or development milestones during the three and nine months ended September 30, 2023, in contrast to prior periods - No research and development expense was recorded for non-refundable license payments during the three and nine months ended September 30, 2023[140](index=140&type=chunk) - No research and development expense was recorded for development milestones during the three and nine months ended September 30, 2023[141](index=141&type=chunk) [Note 12. Restructuring](index=29&type=section&id=Note%2012.%20Restructuring) In July 2023, the company initiated a restructuring, including a 50% workforce reduction, following the failure of the UpRi clinical trial. Total restructuring costs incurred to date are $8.2 million, primarily for severance and employee-related costs, with $4.2 million accrued as of September 30, 2023 - On July 27, 2023, the company announced a restructuring plan, including a reduction of approximately **50% of its employee base**, following the discontinuation of the UpRi clinical development program[143](index=143&type=chunk) - The company expects to incur approximately **$7 million** for severance and benefits and **$2 million** for contract terminations related to the restructuring[144](index=144&type=chunk) | Restructuring Costs (in thousands) | Cumulative Costs to Date | | :--- | :--- | | Severance & Employee Related Costs | $6,425 | | Contract Termination and Other Costs | $1,789 | | **Total Costs** | **$8,214** | - Accrued restructuring costs totaled **$4.19 million** as of September 30, 2023[145](index=145&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and liquidity. It highlights the strategic shift to focus on next-generation ADC platforms following the discontinuation of the UpRi program, the associated restructuring, and the financial impact of these changes, including revenue from collaborations and ongoing operating losses [Overview](index=31&type=section&id=Overview) Mersana Therapeutics, a clinical-stage biopharmaceutical company, is focusing on its next-generation ADC platforms, Dolasynthen and Immunosynthen, after discontinuing the UpRi program due to a failed Phase 2 trial. This strategic shift led to a 50% workforce reduction and continued development of XMT-1660 and XMT-2056, despite significant cumulative operating losses - The company is a clinical-stage biopharmaceutical company focused on developing ADCs for cancer using proprietary Dolasynthen and Immunosynthen platforms[150](index=150&type=chunk) - The Phase 2 UPLIFT clinical trial of UpRi did not meet its primary endpoint, leading to the discontinuation of UpRi-related development activities and termination of Phase 3 trials[152](index=152&type=chunk)[153](index=153&type=chunk) - A restructuring plan was announced on July 27, 2023, involving a reduction of approximately **50% of the employee base**, expected to be substantially complete by the end of 2023[153](index=153&type=chunk) - Development continues for XMT-1660 (Dolasynthen ADC, Phase 1, Fast Track designation for TNBC) and XMT-2056 (Immunosynthen STING-agonist ADC, Phase 1, clinical hold lifted in October 2023)[154](index=154&type=chunk)[155](index=155&type=chunk) - The company incurred a net loss of **$152.1 million** for the nine months ended September 30, 2023, and had an accumulated deficit of **$806.8 million** as of that date[159](index=159&type=chunk) [Financial Operations Overview](index=32&type=section&id=Financial%20Operations%20Overview) The company's revenue is entirely derived from strategic collaborations, with significant contributions from new agreements with Merck KGaA and Janssen. Operating expenses include substantial R&D costs for product candidates and platforms, general and administrative expenses, and new restructuring expenses from the workforce reduction. The company anticipates continued operating losses as it advances its pipeline - All revenue to date has been generated from strategic collaborations, with no product sales[158](index=158&type=chunk) | Collaboration Revenue (9M 2023, in millions) | | :--- | :--- | | 2022 Merck KGaA Agreement | $7.9 | | Janssen Agreement | $14.0 | | GSK Agreement | $1.8 | | Asana BioSciences | $2.5 | - Research and development expenses include employee-related costs, third-party research/preclinical/manufacturing/clinical trial costs, laboratory supplies, facility costs, and upfront/milestone payments[166](index=166&type=chunk) | External R&D Expenses (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | UpRi external costs | $45,208 | $48,023 | | XMT-1660 external costs | $11,241 | $10,879 | | XMT-2056 external costs | $4,614 | $2,334 | | Preclinical and discovery costs | $4,062 | $13,265 | | XMT-1592 external costs | $434 | $3,198 | | Internal research and development costs | $61,215 | $49,977 | | **Total research and development costs** | **$126,774** | **$127,676** | - Restructuring expenses of **$8.2 million** were recognized during the three and nine months ended September 30, 2023, primarily for severance and contract termination costs[175](index=175&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) For the three months ended September 30, 2023, collaboration revenue increased, and operating expenses decreased, leading to a reduced net loss. For the nine months, collaboration revenue also increased, while R&D expenses slightly decreased, and G&A expenses increased, resulting in a lower net loss compared to the prior year | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Dollar Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $7,698 | $5,573 | $2,125 | | Research and development | $30,531 | $50,639 | $(20,108) | | General and administrative | $12,894 | $14,573 | $(1,679) | | Restructuring expenses | $8,214 | $— | $8,214 | | Net loss | $(41,656) | $(59,811) | $18,155 | | Total other income (expense), net | $2,285 | $(172) | $2,457 | - The decrease in R&D expense for the three months was primarily due to a **$14.8 million decrease** in UpRi activities and a **$1.8 million decrease** in XMT-2056 activities[184](index=184&type=chunk) | Metric (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | Dollar Change | | :--- | :--- | :--- | :--- | | Collaboration revenue | $26,154 | $11,893 | $14,261 | | Research and development | $126,774 | $127,676 | $(902) | | General and administrative | $49,409 | $42,158 | $7,251 | | Restructuring expenses | $8,214 | $— | $8,214 | | Net loss | $(152,126) | $(159,288) | $7,162 | | Total other income (expense), net | $6,117 | $(1,347) | $7,464 | - The decrease in R&D expense for the nine months was primarily due to reduced manufacturing for XMT-1660/Dolasynthen (**$3.1 million**), UpRi (**$2.8 million**), and XMT-2056 (**$1.8 million**), partially offset by increased employee compensation and consulting fees prior to restructuring[188](index=188&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is primarily supported by strategic collaborations, equity offerings, and debt financing. As of September 30, 2023, it held $241.0 million in cash, cash equivalents, and marketable securities, which are projected to fund operations into 2026. Future capital requirements are expected to increase with ongoing R&D and potential commercialization efforts - Operations are financed primarily through strategic collaborations, private placements of preferred stock, and public offerings of common stock, including ATM equity offering programs[192](index=192&type=chunk) - During the nine months ended September 30, 2023, the November 2022 ATM generated **$92.2 million in net proceeds** from **14.2 million shares sold**, with **$55.9 million remaining available**[195](index=195&type=chunk) - As of September 30, 2023, the company had **$241.0 million** in cash, cash equivalents, and marketable securities, believed to be sufficient to fund operations into **2026**[197](index=197&type=chunk)[204](index=204&type=chunk) | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(136,920) | $1,866 | | Net cash provided by (used in) investing activities | $99,735 | $(107,290) | | Net cash provided by financing activities | $94,583 | $111,559 | | **Increase in cash, cash equivalents and restricted cash** | **$57,398** | **$6,135** | [Critical Accounting Estimates](index=43&type=section&id=Critical%20Accounting%20Estimates) There were no material changes to the company's critical accounting estimates as reported in its Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes to critical accounting estimates were reported since the Annual Report on Form 10-K for the year ended December 31, 2022[211](index=211&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk due to its investments in cash equivalents and marketable securities, and its floating-rate credit facility. It currently has no material exposure to foreign currency exchange rate risks - The company is exposed to interest rate risk on its **$241.0 million** in cash, cash equivalents, and marketable securities, primarily invested in U.S. Treasury obligations, commercial paper, corporate bonds, and U.S. government agency securities[212](index=212&type=chunk) - The New Credit Facility has a floating interest rate (greater of **8.50%** or prime rate + **5.25%**) on its **$25.0 million** outstanding balance, but a potential change in rates is deemed immaterial to operations[213](index=213&type=chunk) - The company is not currently exposed to market risk related to changes in foreign currency exchange rates[214](index=214&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2023, and reported no material changes in internal control over financial reporting during the quarter - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2023[216](index=216&type=chunk) - No change in internal control over financial reporting occurred during the quarter ended September 30, 2023, that materially affected, or is reasonably likely to materially affect, internal control over financial reporting[217](index=217&type=chunk) [PART II - OTHER INFORMATION](index=45&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings and does not anticipate any existing claims to have a material adverse effect on its business - The company is not currently party to any material legal proceedings[218](index=218&type=chunk) - The company does not believe any existing claims or litigation would individually or in the aggregate have a material adverse effect on its business[218](index=218&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks and uncertainties that could significantly impact the company's business, financial condition, and operational results. These risks span across drug development and regulatory approval, financial stability, reliance on third parties, commercialization challenges, intellectual property protection, legal and regulatory compliance, general business operations, and factors affecting common stock [Risks Related to Development and Approval of Our ADC Product Candidates](index=45&type=section&id=Risks%20Related%20to%20Development%20and%20Approval%20of%20Our%20ADC%20Product%20Candidates) The company faces high risks in developing its limited number of ADC product candidates, XMT-1660 and XMT-2056, given the recent discontinuation of the UpRi program due to trial failure and a prior clinical hold on XMT-2056. Adverse events, trial delays, and the inherent uncertainty of preclinical and clinical results pose significant threats to regulatory approval and commercial viability - XMT-1660 and XMT-2056 are currently the company's only product candidates in clinical trials, increasing business risk if either fails[220](index=220&type=chunk) - The UpRi program was discontinued in July 2023 after its Phase 2 UPLIFT clinical trial failed to meet its primary endpoint, and related Phase 3 trials were terminated[220](index=220&type=chunk)[222](index=222&type=chunk) - The Phase 1 clinical trial of XMT-2056 was on clinical hold from March to October 2023 due to a fatal serious adverse event (SAE), with enrollment resuming at a lowered starting dose[220](index=220&type=chunk)[223](index=223&type=chunk) - Drug discovery and development is a complex, time-consuming, and expensive process with a high rate of failure; promising early results are not predictive of later-stage success[221](index=221&type=chunk)[222](index=222&type=chunk) [Risks Related to our Financial Position and Need for Additional Capital](index=51&type=section&id=Risks%20Related%20to%20our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) The company has a history of net losses and a substantial accumulated deficit, with no product sales revenue to date. It requires significant additional financing to fund ongoing R&D and potential commercialization, and failure to obtain this capital could force delays or termination of development efforts. Future equity or debt financing may lead to stockholder dilution or restrictive covenants - The company has incurred net losses since inception, with a **$41.7 million net loss** for the three months ended September 30, 2023, and an accumulated deficit of **$806.8 million**[244](index=244&type=chunk) - No revenue has been generated from product sales to date, and none is expected in the foreseeable future[244](index=244&type=chunk) - Substantial additional financing will be required to achieve goals, and a failure to obtain necessary capital could force delays, limits, reductions, or termination of product development or commercialization efforts[251](index=251&type=chunk) - Current cash, cash equivalents, and marketable securities of **$241.0 million** (as of September 30, 2023) are believed to be sufficient to fund operations into **2026**, but these estimates are subject to change[254](index=254&type=chunk) [Risks Related to Our Reliance on Third Parties](index=54&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) The company heavily relies on third-party manufacturers, suppliers, and strategic collaborators for preclinical and clinical development, manufacturing, and revenue generation. This reliance introduces risks such as supply limitations, quality control issues, non-compliance with regulations, and potential non-performance or termination of agreements by collaborators, which could severely impact product development and financial performance - The company relies on third-party contract manufacturers for preclinical and clinical trial product supplies and lacks internal commercial-scale manufacturing capabilities[257](index=257&type=chunk) - Reliance on third parties to conduct preclinical studies and clinical trials for product candidates means less direct control over conduct, timing, and completion, with risks of delays or unsuccessful trials[261](index=261&type=chunk)[263](index=263&type=chunk) - Strategic collaborations (e.g., with GSK, Janssen, Merck KGaA) are crucial for research, development, and commercialization, but collaborators may not perform as expected, terminate agreements, or pursue competing products[266](index=266&type=chunk)[267](index=267&type=chunk)[268](index=268&type=chunk) - A substantial portion of the company's revenue has historically come from a small number of collaborators, making it vulnerable to the loss or non-performance of any of these partners[269](index=269&type=chunk)[270](index=270&type=chunk) [Risks Related to Commercialization of Our ADC Product Candidates](index=58&type=section&id=Risks%20Related%20to%20Commercialization%20of%20Our%20ADC%20Product%20Candidates) Commercial success of approved ADC product candidates is highly dependent on market acceptance by physicians, patients, and payors, which can be influenced by efficacy, safety, and cost. The company faces uncertainties regarding target patient populations, challenges in establishing its own sales and marketing infrastructure, and significant competition from other biotechnology and pharmaceutical companies, as well as potential price controls and biosimilar competition - Future commercial success depends on significant market acceptance of approved ADC product candidates among physicians, patients, and health care payors, influenced by efficacy, safety, cost, and alternative treatments[273](index=273&type=chunk)[274](index=274&type=chunk) - The precise incidence and prevalence of target patient populations for drug candidates are uncertain, potentially leading to smaller addressable markets than estimated[277](index=277&type=chunk) - The company lacks a sales or marketing infrastructure and experience, and building one is expensive and time-consuming, with risks of delays or reduced profitability if relying on third parties[278](index=278&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk)[283](index=283&type=chunk) - Sales of approved products will depend on coverage and reimbursement by third-party payors, with cost-control initiatives and adverse pricing limitations potentially hindering profitability[285](index=285&type=chunk)[288](index=288&type=chunk) - The biotechnology and biopharmaceutical industries are highly competitive, with numerous companies developing ADCs and other cancer therapies, many possessing greater financial resources and expertise[290](index=290&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk) [Risks Related to Our Intellectual Property](index=63&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's success hinges on its ability to obtain, maintain, and enforce intellectual property rights globally, which is uncertain due to complex legal and factual considerations. Risks include patents failing to issue, being challenged or invalidated, difficulties in detecting and proving infringement, and potential loss of rights if license obligations are breached. Trade secret protection is also challenging to enforce, and third-party claims of misappropriation or infringement could lead to costly litigation and hinder development efforts - The issuance, scope, validity, enforceability, and commercial value of the company's patent rights are highly uncertain, and patents may be challenged or found invalid/unenforceable[298](index=298&type=chunk)[299](index=299&type=chunk) - Failure to comply with obligations under license or collaboration agreements could result in damages and loss of intellectual property rights essential for developing and protecting ADC product candidates[306](index=306&type=chunk)[307](index=307&type=chunk) - The company may become involved in expensive, time-consuming, and potentially unsuccessful lawsuits to protect or enforce its intellectual property or to defend against third-party infringement claims[312](index=312&type=chunk)[314](index=314&type=chunk)[317](index=317&type=chunk) - Protecting intellectual property rights globally is expensive and challenging, as foreign laws may not offer the same extent of protection as U.S. laws, and enforcement can be difficult[319](index=319&type=chunk)[320](index=320&type=chunk) - Confidentiality agreements may not prevent unauthorized disclosure of trade secrets and other proprietary information, potentially impairing the company's competitive position[323](index=323&type=chunk)[324](index=324&type=chunk) [Risks Related to Regulatory Approval and Other Legal Compliance Matters](index=72&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20and%20Other%20Legal%20Compliance%20Matters) The regulatory approval process for product candidates is expensive, lengthy, and uncertain, with no guarantee of success in the U.S. or abroad. The company faces risks from ongoing legal challenges (e.g., mifepristone litigation), post-approval regulatory compliance, potential limitations of expedited designations (e.g., Fast Track, Orphan Drug), and disruptions from government agencies. Compliance with extensive healthcare, anti-corruption, and data privacy laws is critical, with non-compliance potentially leading to substantial penalties and operational disruptions - The regulatory approval process is lengthy, expensive, and uncertain, with no guarantee of obtaining marketing approval for product candidates in the United States or other countries[333](index=333&type=chunk)[334](index=334&type=chunk) - Ongoing litigation challenging FDA approval of mifepristone could create regulatory uncertainty, potentially delaying or undermining the development, approval, and distribution of new drug products[336](index=336&type=chunk)[337](index=337&type=chunk) - Any product candidate that obtains marketing approval will be subject to ongoing regulatory requirements and review, with potential for restrictions or withdrawal from the market if compliance fails[345](index=345&type=chunk)[347](index=347&type=chunk) - The company is subject to extensive federal and state healthcare, anti-corruption (e.g., FCPA), data privacy (e.g., HIPAA, CCPA, GDPR), and consumer protection laws, with non-compliance potentially leading to substantial penalties[377](index=377&type=chunk)[378](index=378&type=chunk)[380](index=380&type=chunk)[398](index=398&type=chunk)[410](index=410&type=chunk) - Current and future healthcare legislation (e.g., ACA, IRA) may increase the difficulty and cost of obtaining reimbursement for product candidates, impose price controls, and adversely affect future profitability[381](index=381&type=chunk)[389](index=389&type=chunk)[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk) [Risks Related to our Business and Industry](index=92&type=section&id=Risks%20Related%20to%20our%20Business%20and%20Industry) The company's ability to succeed depends on attracting and retaining key personnel, a challenge exacerbated by its recent 50% workforce reduction, which may not yield anticipated savings and could disrupt operations. Managing growth, product liability lawsuits, and potential disruptions from system failures or serious disasters also pose significant risks to business continuity and financial stability - The company's ability to compete depends on attracting and retaining highly qualified managerial, scientific, and medical personnel, a challenge intensified by intense competition and recent executive departures[419](index=419&type=chunk)[420](index=420&type=chunk) - The July 2023 restructuring, involving a **50% workforce reduction**, may not result in anticipated savings, could incur greater costs, disrupt operations, and harm the ability to attract and retain talent[421](index=421&type=chunk)[422](index=422&type=chunk) - The company faces an inherent risk of product liability lawsuits from clinical testing and potential commercialization, which could result in substantial liabilities, limit commercialization, and damage its reputation[424](index=424&type=chunk)[425](index=425&type=chunk) - Internal information technology systems and those of third-party collaborators are vulnerable to security breaches and service interruptions, potentially leading to material disruptions, data loss, and increased costs[429](index=429&type=chunk)[431](index=431&type=chunk) [Risks Related to Our Common Stock](index=95&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) The company's stock price has been and may continue to be volatile, influenced by clinical trial results, regulatory actions, and market conditions. The company does not expect to pay cash dividends, and its corporate governance provisions and Delaware law may discourage acquisitions, potentially limiting stockholder returns - The company's stock price has been and may continue to be volatile, influenced by factors such as clinical trial results, regulatory developments, financial performance, and general market conditions[432](index=432&type=chunk)[435](index=435&type=chunk) - The company does not anticipate paying any cash dividends in the foreseeable future, requiring investors to rely on stock price appreciation for returns[436](index=436&type=chunk) - Provisions in the company's amended certificate of incorporation, by-laws, and Delaware law (Section 203 DGCL) may have anti-takeover effects, discouraging acquisitions even if beneficial to stockholders[437](index=437&type=chunk)[439](index=439&type=chunk)[441](index=441&type=chunk) [General Risk Factors](index=100&type=section&id=General%20Risk%20Factors) General risks include the potential for the company's 'smaller reporting company' status to deter investors, adverse impacts from unfavorable global economic or geopolitical conditions (e.g., inflation, conflicts), and disruptions from serious disasters that could affect facilities, operations, and financial stability - As a 'smaller reporting company,' the company may take advantage of certain exemptions from reporting requirements, which could make its common stock less attractive to investors[453](index=453&type=chunk)[454](index=454&type=chunk) - Unfavorable global economic or geopolitical conditions, including inflation, interest rates, and international conflicts, could adversely affect the company's business, financial condition, or results of operations[455](index=455&type=chunk)[456](index=456&type=chunk) - The company and its third-party dependencies are vulnerable to serious disasters (e.g., floods, fires, epidemics), which could disrupt operations, increase costs, and harm research and development programs[457](index=457&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=101&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states that there were no unregistered sales of equity securities or use of proceeds to report during the period - No unregistered sales of equity securities or use of proceeds were reported[459](index=459&type=chunk) [Item 6. Exhibits](index=102&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including corporate organizational documents, amendments to collaboration agreements, executive employment-related documents, and various certifications - Exhibits include the Fifth Amended and Restated Certificate of Incorporation, Second Amended and Restated Bylaws, amendments to the Janssen collaboration agreement, and executive retirement/offer letters[461](index=461&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer (pursuant to Rules 13a-14(a) and 15d-14(a) and 18 U.S.C. Section 1350) are included[461](index=461&type=chunk) [Signatures](index=103&type=section&id=Signatures) The report is duly signed by Martin Huber, President and Chief Executive Officer, and Brian DeSchuytner, SVP, Chief Operating Officer and Chief Financial Officer, on November 7, 2023 - The Quarterly Report on Form 10-Q was signed by Martin Huber, President and Chief Executive Officer, and Brian DeSchuytner, SVP, Chief Operating Officer and Chief Financial Officer, on November 7, 2023[467](index=467&type=chunk)

Financial Performance - For the six months ended June 30, 2023, the company reported a net loss of $110.5 million, compared to a net loss of $99.5 million for the same period in 2022, resulting in an accumulated deficit of $765.2 million as of June 30, 2023[160]. - Net loss for Q2 2023 was $54.31 million, compared to a net loss of $52.22 million in Q2 2022, reflecting a decrease of $2.09 million[178]. - Total research and development costs rose to $48.97 million in Q2 2023 from $41.23 million in Q2 2022, an increase of $7.74 million[178]. - General and administrative expenses increased by $3.38 million from $14.80 million in Q2 2022 to $18.18 million in Q2 2023, primarily due to higher employee compensation[182]. - Research and development expenses for the six months ended June 30, 2023, increased by $19.21 million to $96.24 million from $77.04 million in the same period of 2022[187]. - Collaboration revenue for the six months ended June 30, 2023, increased by $12.14 million to $18.46 million from $6.32 million in the same period of 2022[186]. - Collaboration revenue increased by $6.4 million from $4.3 million in Q2 2022 to $10.7 million in Q2 2023, driven by increases from the Janssen Agreement and Merck KGaA Agreement[179]. - Total other income (expense), net improved by $5.01 million from $(1.18) million in the six months ended June 30, 2022, to $3.83 million in the same period of 2023[191]. Research and Development - The company is winding down development activities related to UpRi after the Phase 2 UPLIFT trial did not meet its primary endpoint, which was an objective response rate (ORR) in the NaPi2b-positive population[153][154]. - The company is currently enrolling patients in a Phase 1 trial for XMT-1660, which has received Fast Track designation from the FDA for advanced or metastatic triple-negative breast cancer[155]. - XMT-2056, another ADC candidate, is currently on clinical hold due to a Grade 5 serious adverse event, and the company is working to address this hold with the FDA[156]. - The company has entered into a global collaboration with GSK for the co-development and commercialization of XMT-2056, providing GSK with an exclusive option[158]. - The company has established strategic collaborations with Janssen and Merck KGaA for the development of additional ADC product candidates[158]. - Significant external costs for research and development include $19.25 million for UpRi and $6.90 million for XMT-1660 in Q2 2023[172]. - The company expects to incur significant research and development expenses over the next several years for clinical development and manufacturing of XMT-1660 and other product candidates[174]. Cash Flow and Financing - As of June 30, 2023, the company had cash, cash equivalents, and marketable securities totaling $286.6 million[198]. - Net cash used in operating activities for the six months ended June 30, 2023, was $90.8 million, compared to $52.7 million for the same period in 2022[200]. - Net cash used in investing activities decreased significantly to $4.0 million in the first half of 2023 from $90.8 million in the same period of 2022[201]. - Net cash provided by financing activities was $94.7 million for the six months ended June 30, 2023, compared to $100.9 million in 2022[202]. - As of June 30, 2023, approximately $55.9 million remained unsold and available for sale under the November 2022 ATM equity offering program[195]. - The New Credit Facility has an outstanding balance of $25.0 million as of June 30, 2023, with interest rates sensitive to changes in the prime rate[212]. - The company believes its available funds will be sufficient to support its operating plan commitments into 2026[204]. Future Outlook - The company expects cash expenditures to increase due to ongoing research, development, and clinical trials for product candidates[203]. - The company anticipates significant commercialization expenses if marketing approval is obtained for any product candidates[203]. - Future capital requirements will depend on various factors, including the progress of drug discovery and clinical trials[205]. - The company has incurred significant cumulative operating losses since inception, with expectations to continue incurring significant expenses over the next several years[160]. - The company is eligible to earn milestone payments under collaboration agreements with GSK, Janssen, Merck KGaA, and Asana Biosciences, contingent on successful development activities[198].