2024-01-11 08:13:35 ET
Summary
- Mersana Therapeutics' stock has declined by 60% due to clinical holds and trial failures, highlighting the risks associated with the company.
- The lead candidate, Upifitamab Rilsodotin, showed concerning safety and efficacy data, leading to a clinical hold and missed primary endpoint.
- Despite the company's attractive technology and big pharma partnerships, Mersana's future prospects are uncertain and investing in the stock is risky.
I covered Mersana Therapeutics (MRSN) exactly one year ago, and although I liked the science in theory, I stayed neutral because they didn't have enough data. The stock is down 60% from those prices after multiple clinical holds and trial failures, proving that I was lucky not to have invested.
Mersana develops antibody drug conjugate molecules targeting oncological indications. Lead candidate Upifitamab Rilsodotin (UpRi) was in a registrational trial last year targeting platinum resistant ovarian cancer. Mersana's ADCs (antibody drug conjugates) are designed to carry an immunostimulatory payload, unlike the cytotoxic payload carried by other ADCs. The company has four technology platforms - DolaLock, Dolaflexin, Dolasynthen and Immunosynthen. I discussed these in detail in my last coverage. A number of big pharma have signed up with Mersana for these technologies. The list includes Janssen, Merck KgaA and Merck. GSK signed a deal in 2022.
Like I said, the lead candidate was being run through a pivotal trial at that time. The company had some concerning prior data. In both safety and efficacy, this data wasn't too good. There were two treatment-related patient deaths caused by pneumonia, which once led to a clinical hold in 2018. In terms of efficacy, in the general population, ORR actually went down with time, meaning the treatment effect, such as it was, was not sustained. These strong negative indications caused me to take a step back from Mersana, and despite its attractive sounding technology and attractive looking big pharma deals, I stayed neutral.
That the molecule is trouble was amply borne out by their latest data drop. In March, the FDA placed a clinical hold on a Phase 1 trial for its GSK-partnered asset XMT-2056. The hold was placed after a patient death in the trial. In June, even the lead program was put on a clinical hold after 5 patient deaths caused by bleeding events of unknown origin. There were a large number of low grade bleeding events in the 560 patients being treated, 5 of whom died.
Interestingly, JMP's Brian Cheng, who issued a positive outlook report on MRSN despite concerns from some analysts (including this author's), now issued a downgrade, admitting "he made a mistake" and that even if somehow approved, the potential black box warning will make it unappealing to the market.
Finally, in July, the last proverbial nail in UpRi's coffin was firmly stuck when Mersana reported that the pivotal trial missed its primary endpoint. There was nothing more to be done with this unsafe and dangerous molecule which caused numerous patient deaths and did not produce sufficient ORR. The molecule was abandoned and the company went through a restructuring effort to save cash. They laid off 50% of the staff, and let go of the CEO, CMO and a bunch of other c-suites.
In October, there was some small measure of relief as the FDA lifted the clinical hold of XMT-2056, Mersana's other clinical stage candidate that I noted was GSK-partnered. This molecule was being studied for the treatment of tumors expressing the HER2 mutation, including the treatment of advanced or recurrent solid tumors expressing HER2, including gastric, colorectal, breast and non-small cell lung cancers. As part of the lifting of the hold, the company agreed to lower the starting dose in its Phase 1 dose escalation study design. They will begin dose escalation this year. The company has one more candidate, XMT-1660, in multiple solid tumors. In January, the company reported "enrollment in dose escalation and backfill cohorts continuing in Phase 1 clinical trial of XMT-1660." The company plans to begin expansion in Q2 2024 and announce initial clinical data in mid-2024.
While this is neither here or there, I must mention that while Mersana's prospects have gone down, rival ImmunoGen's continued to improve. Its ovarian cancer treatment Elahere (mirvetuximab soravtansine), approved in 2022, saw great sales uptake throughout the year. Finally, a year after approval, AbbVie agreed to buy out IMGN for $10bn in cash.
Financials
MRSN has a market cap of $324mn and a cash balance of $241mn. Research and development (R&D) expenses for the third quarter of 2023 were $30.5 million, while General and administrative (G&A) expenses for the third quarter of 2023 were $12.9 million. At that rate, the company would have cash for 5-6 quarters. With their restructuring efforts in place, they say they will have cash till 2026.
Risks
MRSN has proven again and again that its science does not work. Earlier, it used to be that we were concerned by its safety data; but now, even efficacy is in question. I generally do not like to invest in such stocks.
The asset that has had its hold lifted, you have to remember, still had a patient death, which is the reddest possible flag for a biotech. The same thing happened with UpRi, and earlier as well. MRSN is a big gamble.
Bottomline
MRSN is a bottom-feeder's stock right now. There's money to be made in this sort of gamble. For example, had you bought MRSN right after the collapse, you would be up 400% right now. The stock is able to keep its head above water because it has that load of cash, backed by the $100mn it received from GSK. That asset is now again on track, and while, from a purely medical point of view, I think MRSN's programs are probably wasteful (given the data so far), I wouldn't be surprised if the gamble of buying MRSN pays off for some people.
For further details see:
Mersana Therapeutics: A Bottom-Feeding Gamble Of A Stock