Mersana Plans IPO to Finance Clinical Trials for Breast Cancer Drug

Xconomy Boston — 

Mersana Therapeutics has filed for an initial public stock offering that would help fund clinical trials for the company’s experimental treatment for breast cancer.

The paperwork filed with securities regulators lists a $75 million stock offering, but that figure will likely change as Cambridge, MA-based Mersana determines how many shares it will offer and at what price. The company has applied for a stock listing on the Nasdaq exchange under the stock symbol “MRSN.”

Mersana is developing antibody drug conjugates (ADCs), a type of cancer drug that links antibodies to cancer-fighting toxins. This approach uses antibodies to deliver a targeted strike to tumors that’s meant to spare healthy tissue from the treatment’s toxic effects.

Mersana develops its ADCs using a technology that employs a biodegradable polymer that stays stable in the bloodstream and releases its drug payload once inside cancer cells. That technology was originally developed at Massachusetts General Hospital. The company uses the technology to link proprietary cancer-fighting agents made from dolastatins, a family of compounds found in a sea slug. Mersana calls this ADC platform Dolaflexin.

Mersana’s lead drug candidate, XMT-1522, targets cancers whose cells overexpress HER2, a protein that promotes tumor growth. The company is currently testing a range of doses in a Phase 1 clinical trial enrolling mostly breast cancer patients. Safety results from the trial are expected by the end of the year. The company says in the securities filing that it plans to expand testing of the therapy into more cancers that are not addressed by the currently available HER2 therapies, including other breast cancers, non-small cell lung cancer, and gastric cancer.

The Mersana technology has drawn interest from large pharmaceutical companies. In 2014, Mersana began a research partnership with Japan-based Takeda Pharmaceuticals to develop ADCs targeting up to seven antigen targets selected by Takeda. So far, Mersana has received $24.8 million in payments from that deal. If the collaboration successfully produces seven commercialized drugs, the company stands to gain milestone payments topping $1 billion.

The relationship between Takeda and Mersana deepened last year when the two entered a partnership on XMT-1522. Takeda paid Mersana $26.5 million up front, with the potential for $288 million more in milestone payments, in exchange for the rights to develop and commercialize XMT-1522 outside of the U.S. and Canada. If Takeda can bring the cancer drug to the market, it would owe Mersana royalties on sales.

The connections between Takeda and Mersana also include an ownership stake. The Japanese pharma joined the syndicate of investors financing Mersana’s $33 million Series C round of investment a year ago. According to the IPO filing, Takeda invested approximately $10 million.

Mersana has another link to Takeda. The biotech is led by president and CEO Anna Protopapas, a Takeda veteran whose experience includes serving as president of Millennium Pharmaceuticals, the oncology division of the Japanese pharma.

The field of ADC developers is crowding. Large pharmaceutical companies such as Bristol-Myers Squibb (NYSE: BMY), AstraZeneca (NYSE: AZN), and Pfizer (NYSE: PFE) are developing approaches that use different classes of anti-cancer payloads, new approaches to linking those payloads to antibodies, and new ways of targeting cancer cells, Mersana says in its filing. Bothell, WA-based Seattle Genetics (NASDAQ: SGEN) focuses exclusively on ADCs. That company has brought one ADC to market, a treatment for the most common form of Hodgkin lymphoma. SeaGen’s drug pipeline includes several other compounds in clinical trials for other cancers.

Mersana says that the IPO proceeds would finance the Phase 1 clinical trial for XMT-1522, as well as the pre-clinical and clinical development of a second ADC being developed as a potential treatment for ovarian cancer and non-small cell lung cancer. The drug, XMT-1536, targets NaPi2b, an antigen expressed in those cancers. The company expects to start clinical trials for that compound in early 2018.

All of Mersana’s revenue comes from its strategic partnerships. Besides its deals with Takeda, the company has a separate research partnership with Germany-based The Merck Group , dating to 2014. That deal calls for Mersana to develop ADC candidates for antigens chosen by Merck. According to the filing, Merck paid Mersana $12 million up front and has since paid an additional $2 million in milestones so far. Mersana stands to gain as much as $778 million in additional milestone payments, if the partnership yields successful drugs.

In 2016, Mersana reported $25.1 million in collaboration revenue. Last year, the company spent $32 million on research and development, a 50 percent increase compared to 2015. The company says in its filing that it expects those expenses to rise as it continues clinical development of its drug candidates. Through the end of the first quarter, Mersana reported having $88.5 million in cash.

Image of metastatic breast cancer in pleural fluid by Flickr user Ed Uthman via a Creative Commons license.