mrsn-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2022

☐ 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 or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

840 Memorial Drive Cambridge, MA 02139

(Address of principal executive offices)

(Zip Code)

(617) 498-0020

(Registrant’s telephone number, including area code)

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


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

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

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

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


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

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

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

There were 96,991,298 shares of Common Stock ($0.0001 par value per share) outstanding as of May 5, 2022.

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REFERENCES TO MERSANA

Throughout this Quarterly Report on Form 10-Q, the “Company,” “Mersana,” “we,” “us,” and “our,” except where the context requires otherwise, refer to Mersana Therapeutics, Inc. and its consolidated subsidiary, and “our board of directors” refers to the board of directors of Mersana Therapeutics, Inc.

FORWARD LOOKING STATEMENTS AND INDUSTRY DATA

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

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

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

•the adequacy of our inventory of upifitamab rilsodotin, or UpRi, and our other clinical product candidates to support our ongoing and planned clinical trials, as well as the outcome of planned manufacturing runs;

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

•unmet needs in ovarian and other cancer treatment;

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

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

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

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

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

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

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2022, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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

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The forward-looking statements contained herein represent our views as of the date of this Quarterly Report on Form 10-Q and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. We anticipate that subsequent events and developments will cause our views to change. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q may include industry and market data, which we may obtain from our own internal estimates and research, as well as from industry and general publications and research, surveys, and studies conducted by third parties. Industry publications, studies, and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third‑party sources.

RISK FACTORS SUMMARY

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

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

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

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

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

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

•We only have two product candidates, UpRi and XMT-1592, in clinical trials. A failure of any of our current or future product candidates in clinical development could adversely affect our business and may require us to discontinue development of other product candidates based on the same technology.

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

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

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

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

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

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

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

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			Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Balance Sheets as of March 3 1 , 202 2 and December 31, 20 21			6
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 3 1 , 202 2 and 20 21			7
Condensed Consolidated Statement of Stockholders’ Equity for the three months ended March 3 1 , 202 2 and 20 21			8
Condensed Consolidated Statements of Cash Flows for the three months ended March 3 1 , 202 2 and 20 21			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			34
Item 4. Controls and Procedures			35
PART II - OTHER INFORMATION			36
Item 1. Legal Proceedings			36
Item 1A. Risk Factors			36
Item 6. Exhibits			83
Signatures			85

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Mersana Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(unaudited)


	March 31, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	230,057	$	177,947


Prepaid expenses and other current assets	11,413		10,951
Total current assets	241,470		188,898
Property and equipment, net	2,549		1,968
Operating lease right-of-use assets	12,001		12,889
Other assets, noncurrent	2,247		2,356
Total assets	$	258,267	$	206,111
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	9,775	$	12,321
Accrued expenses	27,475		28,716
Deferred revenue	16,578		3,944
Operating lease liabilities	2,404		2,303

Other current liabilities	231		239
Total current liabilities	56,463		47,523
Operating lease liabilities, noncurrent	10,567		11,247
Long-term debt, net	24,702		24,626
Deferred revenue, noncurrent	25,620		—
Other liabilities, noncurrent	389		974
Total liabilities	117,741		84,370
Commitments (Note 10)
Stockholders' equity:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	—		—
Common stock, $0.0001 par value; 175,000,000 shares authorized; 87,073,084 and 73,709,056 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	9		7
Additional paid-in capital	638,254		572,213

Accumulated deficit	(497,737)		(450,479)
Total stockholders’ equity	140,526		121,741
Total liabilities and stockholders’ equity	$	258,267	$	206,111

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

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Mersana Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Collaboration revenue	$	2,036	$	11
Operating expenses:
Research and development	35,806		27,415
General and administrative	12,782		7,208
Total operating expenses	48,588		34,623
Other income (expense):
Interest income	18		12
Interest expense	(724)		(93)
Total other income (expense), net	(706)		(81)
Net loss	(47,258)		(34,693)



Net loss attributable to common stockholders — basic and diluted	$	(47,258)	$	(34,693)
Net loss per share attributable to common stockholders — basic and diluted	$	(0.59)	$	(0.50)

Weighted-average number of shares of common stock used in net loss per share attributable to common stockholders — basic and diluted	79,928,591		68,987,857

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

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Mersana Therapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Deficit		Stockholders’ Equity
	Shares	Amount

















































Balance at December 31, 2020	68,841,288	$	7	$	508,499	$	(280,419)	$	228,087
Exercise of stock options	148,472	—		764		—		764
Vesting of restricted stock units, net of employee tax obligations	61,678	—		(259)		—		(259)
Stock-based compensation expense	—	—		4,039		—		4,039
Net loss	—	—		—		(34,693)		(34,693)
Balance at March 31, 2021	69,051,438	$	7	$	513,043	$	(315,112)	$	197,938


















Balance at December 31, 2021	73,709,056	$	7	$	572,213	$	(450,479)	$	121,741
Issuance of common stock from at-the-market transactions, net of issuance costs of $1,322	13,169,903	2		60,460		—		60,462
Exercise of stock options	26,951	—		96		—		96
Vesting of restricted stock units	167,174	—		—		—		—
Stock-based compensation expense	—	—		5,485		—		5,485
Net loss	—	—		—		(47,258)		(47,258)
Balance at March 31, 2022	87,073,084	$	9	$	638,254	$	(497,737)	$	140,526

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

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Mersana Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
Cash flows from operating activities
Net loss	$	(47,258)	$	(34,693)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	205		226


Stock-based compensation	5,485		4,039
Other non-cash items	194		38
Changes in operating assets and liabilities:

Prepaid expenses and other current assets	(462)		(37)
Other assets	—		(1,366)
Accounts payable	(2,524)		3,415
Accrued expenses	(2,159)		1,251
Operating lease right-of-use assets	889		415
Operating lease liabilities	(579)		(299)

Deferred revenue	38,254		(11)
Net cash used in operating activities	(7,955)		(27,022)

Cash flows from investing activities


Purchase of property and equipment	(329)		(114)
Net cash used in investing activities	(329)		(114)

Cash flows from financing activities

Net proceeds from the at-the-market facility	60,374		—
Proceeds from exercise of stock options	96		764

Payment of employee tax obligations related to vesting of restricted stock units	—		(259)


Payments under capital lease obligations	(76)		(33)
Net cash provided by financing activities	60,394		472

Increase (decrease) in cash, cash equivalents and restricted cash	52,110		(26,664)
Cash, cash equivalents and restricted cash, beginning of period	178,425		255,415
Cash, cash equivalents and restricted cash, end of period	$	230,535	$	228,751

Supplemental disclosures of non-cash activities:
Purchases of property and equipment in accounts payable and accrued expenses	$	457	$	189


Cash paid for interest	$	531	$	60

Right-of-use assets obtained in exchange for financing lease liabilities	$

SEC Form 10-Q filed by Mersana Therapeutics Inc.