MRUS - Merus: Dutch Drug Developer With An Interesting Platform

2023-04-04 09:28:45 ET

Summary

• Merus N.V. develops bispecific and trispecific antibodies for cancer.
• They have deals with an array of big pharma.
• The lead asset may file a BLA soon.

Merus N.V. ( MRUS ) is a Dutch developer of antibody therapeutics targeting cancer. These antibodies are bispecific and trispecific IgG antibodies developed using Merus' Multiclonics platform. Lead asset is Zenocutuzumab ("ZENO") (MCLA-128), a HER2 and HER3 targeting bispecific. Zeno is being tested in NRG1+ cancer as monotherapy, in which a Phase 1/2 registration directed trial is ongoing. The company is planning a clinical update this year. Zeno plus afatinib combo in NRG1+ NSCLC, and ZENO with androgen deprivation therapy ("ADT") is being tested in castration-resistant prostate cancer ("CRPC").

The pipeline looks like this:

A second asset, Petosemtamab (MCLA-158), is a EGFR x LGR5 bispecific targeting solid tumors in a phase 1/2 trial, and one more, MCLA-129, an EGFR x c-MET bispecific, in a phase 1/2 trial targeting solid tumors as monotherapy and with a third generation EGFR TKI as a combo therapy in NSCLC. Last year, this last asset produced data that was decent, but somewhat dampened investor enthusiasm who were expecting more.

Three other assets are in the clinic targeting various indications and with different bispecific targets. Phase 1 trials are ongoing for these assets.

The company plans to lead with zeno, which binds to HER2 and blocks HER3 (the dock and block mechanism); and in preclinical trials has shown itself to be 100-fold more potent than anti-HER3 mAbs tested. The molecule has an orphan and fast track designation from the FDA in CRPC and NRG1+ cancer as a 2nd line treatment, respectively. The company tentatively plans to file a BLA in NRG1+ NSCLC4 and/or PDAC4 if the data is good, however, in November, the FDA told them more patients will need to be enrolled to support a BLA. They eventually plan to make tissue agnostic filings for the molecule. A few years back, that would have been unprecedented. But with the 2017 approval of pembrolizumab in a tumor agnostic setting in patients with high microsatellite instability (MSI-H) tumors, there are now quite a few successfully approved tissue agnostic drugs.

At ASCO last year, the company presented data from the NSRG1+ trial in a poster titled "Efficacy and safety of zenocutuzumab, a HER2 x HER3 bispecific antibody, in advanced NRG1 fusion-positive (NRG1+) cancer." Data showed a 34% ORR, a 9 month duration of response, and the molecule was also safe and well-tolerated. However, among the 208 patients in the monotherapy RP2D trial, there were some grade 3-4 adverse events and a single grade 5 adverse event from infusion site reactions. A grade 5 event means death. The company states that this was reported in 2017, here - Alsina et al. ASCO, 2017 . However, the grade 5 nature of this AE is not immediately apparent from this 2017 report. Below is the list of AEs for the molecule; I would say the safety profile is not a slam dunk.

The NSRG1+ space is not large, with probably just "several thousand" patients in the US according to Merus. However, there is increasing competition in the form of Seribantumab from Elevation Oncology, which has produced similar results albeit in a smaller population. What is important here is to understand that Seribantumab is an mAb, so it sort of negates the Merus thesis that its molecules work better than mAbs. There are also a few other competing molecules in the pipeline.

An upcoming catalyst is the data to be presented through two posters at the American Association for Cancer Research ((AACR)), between April 14 and 19. Details of the poster are as follows:

• On Apr. 17, two presentations will focus on interim data for MCLA-158 (petosemtamab) in previously treated head and neck squamous cell carcinoma ((HNSCC)) and mid-stage data for the same candidate in advanced gastric/ esophageal adenocarcinoma.

• A day later, bispecific antibody MCLA-129 will be the subject of a poster presentation about its pre-clinical mechanism of action. MCLA-129 is currently under development for certain solid tumors such as HNSCC and non-small cell lung cancer.

Financials

MRUS has a market cap of $852mn and a cash balance of $327mn. Research and development expenses for the year ended December 31, 2022 were $150 million while general and administrative expenses were $52 million. At that rate, they have cash for another year and a half.

In 2021, Eli Lilly and Company ( LLY ) paid Merus $60mn upfront and promised $1.6bn in biobucks for a three-therapy deal with T-cell redirecting bispecific antibodies. The deal was done via LLY's Loxo Oncology unit. Among other major backers of Merus are Novartis, Johnson & Johnson and Pfizer. Also included are Incyte and Ono. Incyte's partnered molecule is MCLA-145, but after " discussions with the FDA, the company determined that trials for the accelerated approval couldn't be done in a way that would justify the investment." Ex-US rights to the molecule were returned to Merus, and Incyte will only support the U.S. program for a limited time. Other programs in the deal remain unchanged .

Bottom Line

Merus N.V. is an interesting company with some solid data and good chances of profitmaking during the pre-commercial stage. I am not so sanguine about its commercial appeal given the market size and competition. An approval may prove their platform, however, not every company is able to follow through with that momentum. All in all, Merus N.V. stock is trading at a midpoint to its 52-week highs right now and could be an opportunity for savvy investors who do not invest beyond approval.

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