Mersana Therapeutics Inc.
11/14/2025 | Press release | Distributed by Public on 11/14/2025 07:11
Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q, or this Quarterly Report, and the audited financial statements and the accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission, or SEC, on March 3, 2025. Unless otherwise indicated in this Quarterly Report on Form 10-Q, all share amounts and per share amounts, except for the number of authorized shares of common stock or preferred stock or par value of common stock or preferred stock, have been adjusted to reflect a 1-for-25 reverse split of our common stock, or the Reverse Stock Split.
Our actual results and the timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods.
The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report, including those risks identified under Part II, Item 1A. Risk Factors.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
Proposed Acquisition by Day One Biopharmaceuticals, Inc.
On November 12, 2025, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Day One Biopharmaceuticals, Inc., a Delaware corporation, or Parent, and Emerald Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent, or Merger Sub.
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Merger Sub will commence a tender offer, or the Offer, to acquire all of our issued and outstanding shares of common stock for (i) $25.00 net per share, payable in cash, without interest, plus (ii) one contingent value right per share, each, a CVR, which represents the right to receive milestone payments of up to an aggregate of $30.25 per share in cash upon the achievement of certain specified milestones in accordance with the terms and subject to the conditions of a contingent value rights agreement to be entered into with a rights agent mutually agreeable to Parent and us. The Offer will remain open for 20 business days, subject to extension under certain circumstances.
Following the consummation of the Offer, subject to the terms and conditions of the Merger Agreement, and in accordance with the General Corporation Law of the State of Delaware, Merger Sub will merge with and into us as provided in the Merger Agreement, with us continuing as the surviving corporation and a wholly owned subsidiary of Parent, or the Merger. The closing of the Merger is expected to occur by the end of January 2026, subject to the satisfaction of customary closing conditions.
Overview
We are a clinical-stage biopharmaceutical company focused on developing antibody-drug conjugates, or ADCs, that offer a clinically meaningful benefit for cancer patients with significant unmet need. We have leveraged decades of industry learnings to develop two proprietary and differentiated ADC platforms: Dolasynthen and Immunosynthen. Dolasynthen is our cytotoxic ADC platform that is designed to generate site-specific, homogeneous ADCs. Dolasynthen allows for drug-to-antibody ratios, or DARs, to be optimized for specific targets and utilizes a proprietary auristatin payload that has been shown clinically to avoid dose-limiting severe neutropenia, peripheral neuropathy and ocular toxicity. Immunosynthen is our proprietary STING (stimulator of interferon genes)-agonist platform that is designed to generate systemically administered ADCs that locally activate STING signaling in both antigen-expressing tumor cells and in tumor-resident immune cells to unlock the anti-tumor potential of innate immune stimulation. We have utilized these platforms to generate ADC product candidates for our company and collaborators that we believe have the potential to be used as monotherapy and in combination with other agents to improve upon today's standards of care. Our two clinical-stage product candidates are emiltatug ledadotin (XMT-1660), which we refer to as Emi-Le, and XMT-2056.
Emi-Le is a B7-H4-targeting Dolasynthen ADC designed with a precise, target-optimized DAR of 6. We are conducting a Phase 1 open-label clinical trial evaluating the safety and tolerability of Emi-Le. In January 2025, we announced positive initial clinical data as of a December 13, 2024 data cut date from the dose escalation and backfill cohorts of our ongoing Phase 1 clinical trial of Emi-Le in patients with breast cancer, endometrial cancer, ovarian cancer and adenoid cystic carcinoma type 1, or ACC-1. Additionally, at medical conferences held in May and June 2025, we announced additional positive interim clinical data as of a March 8, 2025 data cut date from the dose escalation and backfill cohorts of our ongoing Phase 1 clinical trial of Emi-Le.
In May 2025, we announced that we were, for the near-term, focusing our Emi-Le development efforts on breast cancer to enable the generation of additional safety, tolerability and clinical activity data.
To that end, we continue to follow patients in our two dose expansion cohorts in patients with triple-negative breast cancer, or TNBC, who have received one to four prior treatment lines in the locally advanced or metastatic setting, including at least one prior topoisomerase-1 inhibitor, or topo-1, ADC. The first of these dose expansion cohorts is the "Dose A" cohort, in which patients are receiving 67.4 mg/m2of Emi-Le administered every four weeks, or Q4W. The second dose expansion cohort is the "Dose B" cohort, in which patients are receiving 80 mg/m2of Emi-Le Q4W following a loading dose of 44.5 mg/m2of Emi-Le on days 1 and 8 of the first four-week cycle.
We are also evaluating Emi-Le in patients with ACC-1, a population with very high unmet need, in the backfill cohorts of the dose escalation portion of our ongoing Phase 1 clinical trial. In June 2025, at ASCO, we presented interim clinical data from nine evaluable patients with ACC-1. As of October 1, 2025, we have enrolled a substantially greater number of patients with ACC-1 in these backfill cohorts than was presented at ASCO. The data from ACC-1 patients enrolled in this trial continues to mature as we enroll additional patients and patients remain on treatment for longer periods. We have continued to be encouraged by the responses of the patients in these backfill cohorts.
Emi-Le continues to be generally well-tolerated, and its observed safety profile remains consistent with previously disclosed data.
XMT-2056 is a systemically-administered Immunosynthen ADC targeting a novel human epidermal growth factor receptor 2, or HER2, epitope with a DAR of 8 that we are investigating in a Phase 1 clinical trial designed to assess the safety and tolerability. In late 2023, we announced the resolution of a U.S. Food and Drug Administration, or FDA, clinical hold on our Phase 1 clinical trial of XMT-2056 in previously treated patients with advanced or recurrent solid tumors expressing HER2, including breast, gastric, colorectal and non-small cell lung cancers, and in the first half of 2024, we restarted the trial. We continue to enroll patients in the dose escalation portion of the trial. During the quarter ended September 30, 2025, we achieved and received payment for a $15 million development milestone under our Collaboration, Option and License Agreement, or the GSK Collaboration Agreement, with GlaxoSmithKline Intellectual Property (No. 4) Limited, or GSK.
On May 6, 2025, we announced the implementation of a strategic restructuring and reprioritization plan. In connection therewith, our board of directors approved certain expense reduction measures, including our commitment to a reduction of approximately 55% of our then-current employee base across all functions, or the 2025 Restructuring. The 2025 Restructuring was completed as of September 30, 2025. As part of the strategic restructuring and reprioritization plan we announced with the 2025 Restructuring, we have also reduced our research activities and eliminated our internal pipeline development efforts.
In July 2023, we decided to discontinue the development of upifitimab rilsodotin (XMT-1536), or UpRi, and began to wind-down our UpRi-related development activities, including several clinical trials of UpRi, and our regulatory and commercial readiness efforts. At the same time, we announced that our board of directors had approved certain expense reduction measures, including a reduction of approximately 50% of our then-current employee base, or the 2023 Restructuring. Our wind-down of UpRi-related activities and the 2023 Restructuring were substantially complete as of December 31, 2023.
We have entered into a global collaboration pursuant to the GSK Collaboration Agreement that provides GSK an exclusive option to co-develop and commercialize XMT-2056. In addition, we have established strategic research and development collaborations with Janssen Biotech, Inc., or Johnson & Johnson, and Ares Trading, S.A., a wholly owned subsidiary of Merck KGaA, Darmstadt, Germany, or each of these entities, as applicable, Merck KGaA, for the development and commercialization of additional ADC product candidates leveraging our proprietary platforms against a limited number of targets selected by our collaborators. We believe the potential of our ADC product candidates and platforms, supported by our scientific and technical expertise and enabled by our intellectual property strategy, all support our independent and collaborative efforts to discover and develop life-changing ADCs for patients fighting cancer.
Since inception, our operations have focused on building our platforms, identifying potential product candidates, producing drug substance and drug product material for use in preclinical studies, conducting preclinical and toxicology studies, manufacturing clinical trial material and conducting clinical trials, establishing and protecting our intellectual property, staffing our company and raising capital. We do not have any products approved for sale and have not generated any revenue from product sales. We have funded our operations primarily through our strategic collaborations, private placements of our convertible preferred stock and public offerings of our common stock, including through our at-the-market, or ATM, equity offering programs.
Since inception, we have incurred significant cumulative operating losses. Our net losses were $56.0 million and $55.1 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had an accumulated deficit of $951.5 million. We expect to continue to incur significant expenses and operating losses over the next several years if and as we:
•continue clinical development and manufacturing activities for Emi-Le and XMT-2056;
•conduct activities under our collaborations with Johnson & Johnson, Merck KGaA and GSK;
•obtain marketing approvals for our current product candidates for which we complete clinical trials;
•develop a sustainable and scalable manufacturing process for our product candidates, including establishing and maintaining commercially viable supply and manufacturing relationships with third parties;
•address any competing technological and market developments;
•maintain, expand and protect our intellectual property portfolio; and
•hire additional personnel.
As of September 30, 2025, we had cash and cash equivalents of $56.4 million. We believe that our currently available funds will be sufficient to fund our current operating plan commitments into mid-2026. There is substantial doubt about our ability to continue as a going concern. For more information, refer to Liquidity and Capital Resourcesbelow and Note 1, Nature of business and basis of presentation,in the notes to the condensed consolidated financial statements. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.
Impact of Tariffs
The new U.S. administration has announced or imposed a series of tariffs on U.S. trading partners. In response, several countries have threatened or imposed retaliatory measures. While we have not experienced, and do not currently expect to experience, any significant direct impact from these tariffs and retaliatory measures, the full extent of the future impact of these and other threatened measures remains uncertain. We continue to monitor these tariffs and retaliatory measures and their possible effects on our business.
Financial Operations Overview
Revenue
To date, we have not generated any revenue from the sale of products. All of our revenue has been generated from strategic collaborations.
In December 2022, we entered into a collaboration and commercial license agreement, or the 2022 Merck KGaA Agreement, with Ares Trading S.A., a wholly-owned subsidiary of Merck KGaA, Darmstadt, Germany. The 2022 Merck KGaA Agreement provides for the development and commercialization of ADC product candidates utilizing our Immunosynthen platform for up to two target antigens. Merck KGaA is responsible for generating antibodies against the target antigens, and we are responsible for performing bioconjugation activities to create ADCs as well as certain chemistry, manufacturing and controls development and early-stage manufacturing activities at Merck KGaA's cost. Merck KGaA has the exclusive right to and is responsible for the further development and commercialization of these ADC product candidates. During the three months ended September 30, 2025 and 2024, we recognized $1.8 million and $3.4 million, respectively, of collaboration revenue related to the 2022 Merck KGaA Agreement. During the nine months ended September 30, 2025 and 2024, we recognized $2.4 million and $6.6 million, respectively, of collaboration revenue related to the 2022 Merck KGaA Agreement.
In August 2022, we entered into the GSK Agreement with GSK to provide GSK with an exclusive option to obtain an exclusive license to co-develop and to commercialize products containing XMT-2056, or Licensed Products. We are responsible for manufacturing, research and early clinical development related to our XMT-2056 program prior to GSK's exercise, if any, of its option. If GSK exercises its option, GSK will have the exclusive right to and will be responsible for the further co-development and commercialization of Licensed Products. During the three months ended September 30, 2025 and 2024, we recognized $8.6 million and $0.5 million, respectively, of collaboration revenue related to the GSK Agreement. During the nine months ended September 30, 2025 and 2024, we recognized $9.6 million and $0.6 million, respectively, of collaboration revenue related to the GSK Agreement.
In February 2022, we entered into a research collaboration and license agreement with Johnson & Johnson for the development and commercialization of ADC product candidates utilizing our Dolasynthen platform for up to three target antigens. We refer to such agreement, as amended on July 14, 2023 and September 25, 2023, as the Johnson & Johnson Agreement. Johnson & Johnson is responsible for generating antibodies against the target antigens, and we are responsible for performing bioconjugation activities to create ADCs as well as certain chemistry, manufacturing and controls development and early-stage manufacturing activities at Johnson & Johnson's cost. Johnson & Johnson has the exclusive right to and is responsible for the further development and commercialization of these ADC product candidates. In August 2024, we entered into a clinical supply agreement with Johnson & Johnson, or the 2024 Johnson & Johnson CSA, for the clinical manufacturing services related to a licensed ADC for a selected target. The Johnson & Johnson Agreement and the 2024 Johnson & Johnson CSA are referred to as the Johnson & Johnson Agreements. In December 2024, Johnson & Johnson terminated without cause its development of ADCs directed to the other two targets it had selected under the Johnson & Johnson Agreement. As a result, there is one ongoing ADC development program directed to the remaining target. During the three months ended September 30, 2025 and 2024, we recognized $0.6 million and $8.8 million, respectively, of collaboration revenue related to performance under the Johnson & Johnson Agreements. During the nine months ended September 30, 2025 and 2024, we recognized $4.8 million and $16.7 million, respectively, of collaboration revenue related to performance under the Johnson & Johnson Agreements. In the third quarter of 2025, Johnson & Johnson received clearance from the U.S. Food and Drug Administration, or FDA, of an investigational new drug application, or IND, for a Dolasynthen ADC developed under the Johnson & Johnson Agreement. An $8.0 million development milestone is associated with the further progress of this first-in-human clinical trial pursuant to the Johnson & Johnson Agreement.
For the foreseeable future, we expect substantially all of our revenue to be generated from our ongoing collaboration agreements with GSK, Johnson & Johnsonand Merck KGaA. Given the uncertain nature and timing of clinical development, we cannot predict when or whether we will receive further milestone payments or any royalty payments under these collaborations.
Expenses
Research and development expenses
Research and development expenses include our drug discovery efforts, manufacturing and the development of our product candidates, which consist of:
•employee-related expenses, including salaries, benefits and stock-based compensation expense;
•costs of funding research and development performed by third parties that conduct research, preclinical activities, manufacturing and clinical trials on our behalf;
•laboratory supplies;
•facility costs, including rent, depreciation and maintenance expenses; and
•upfront and milestone payments under our third-party licensing agreements.
Research and development costs are expensed as incurred. Costs of certain activities, such as manufacturing, preclinical studies and clinical trials, are generally recognized based on an evaluation of the progress to completion of specific tasks. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations and information provided to us by the third parties with whom we contract.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials and manufacturing costs. While, as part of the 2025 Restructuring, we have reduced our research activities and eliminated our internal pipeline development efforts, we expect that our future research and development costs may increase over current levels, depending on the progress of our clinical development programs. There are numerous factors associated with the successful development and commercialization of any of our product candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at our current stage of development. Additionally, future commercial and regulatory factors beyond our control may impact our clinical development programs and plans.
We have not historically allocated our internal research and development expenses on a program-by-program basis as our employees and other resources are deployed across multiple projects under development. Internal research and development expenses are presented as one total. Our internal research and development costs are primarily personnel-related costs, stock-based compensation costs, and facility costs, including depreciation and lab consumables.
We incur significant external costs for manufacturing our product candidates and platforms and for clinical research organizations that conduct clinical trials on our behalf. We capture these external expenses for each product candidate in clinical development. Costs for our platforms with an associated product candidate in clinical development are typically allocated to our most clinically advanced product candidate based on that platform. All external research and development expenses not attributable to our product candidates in clinical development are captured within preclinical, discovery and collaboration costs. These costs relate to our former preclinical product candidates XMT-2068 and XMT-2175, development of which we have terminated in connection with the 2025 Restructuring; additional earlier discovery stage programs; reimbursable costs incurred in association with our strategic collaborations and certain unallocated costs. The following table summarizes our external research and development expenses, presented by program as described above, and our internal research and development expenses for each of the three and nine month periods ended September 30, 2025 and 2024.
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| Emi-Le external costs | $ | 4,693 | $ | 3,470 | $ | 15,092 | $ | 9,413 | |||||||||||||||
| XMT-2056 external costs | 2,548 | 1,314 | 6,054 | 3,361 | |||||||||||||||||||
|
UpRi external costs(a)
|
(890) | (182) | (890) | 387 | |||||||||||||||||||
|
Preclinical, discovery and collaboration costs(a)
|
789 | (1,036) | 3,567 | (726) | |||||||||||||||||||
| Internal research and development costs | 5,042 | 11,237 | 22,918 | 38,299 | |||||||||||||||||||
| Total research and development costs | $ | 12,182 | $ | 14,803 | $ | 46,741 | $ | 50,734 | |||||||||||||||
(a) Negative amounts primarily reflect the favorable resolutions of outstanding accrual balances.
The successful development of our product candidates is highly uncertain. As such, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of our product candidates. We are also unable to predict when, if ever, we will generate revenue from commercialization and sale of any of our product candidates that obtain regulatory approval. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
•successful completion of preclinical studies and investigational new drug, or IND-enabling studies;
•successful enrollment in and completion of clinical trials;
•receipt of marketing approvals from applicable regulatory authorities;
•establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
•obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;
•commercializing the product candidates, if and when approved, whether alone or in collaboration with others; and
•continued acceptable safety profile of the drugs following approval.
A change in the outcome of any of these variables with respect to the development, manufacture or commercialization of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate.
For example, in July 2023 we announced our decision to discontinue the clinical development of UpRi. Consequently, we have allocated resources previously dedicated to this program into our next-generation ADCs and platforms, Dolasynthen and Immunosynthen. Similarly, as part of our strategic restructuring and reprioritization plan and the 2025 Restructuring, we have reduced our research activities and eliminated our internal pipeline development efforts. In the near term, we are focusing Emi-Le development efforts on breast cancer while continuing to support the dose escalation portion of our Phase 1 clinical trial of XMT-2056 and our ongoing collaborations. We expect to incur significant research and development expenses over the next several years as we continue our clinical development and manufacturing of Emi-Le and XMT-2056.
General and administrative expenses
General and administrative expenses consist primarily of salaries and other employee-related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development, legal operations, information technology and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and fees for accounting and other consulting services.
We expect to incur significant general and administrative expenses over the next several years to support continued development activities and to operate as a public company.
Restructuring expenses
Restructuring expenses consists primarily of severance and benefit payments, outplacement services and related expenses. During the three and nine months ended September 30, 2025, we recognized $0.2 million and $4.1 million, respectively, of such expenses. The 2025 Restructuring was completed as of September 30, 2025.
Other income (expense)
Other income (expense) consists primarily of interest expense related to borrowings under our credit facility and associated amortization of the deferred financing costs, accretion of debt discount and the loss on extinguishment of debt resulting from the repayment of all amounts owed under our credit facility. Interest income includes interest earned on cash equivalents and marketable securities.
Results of Operations
Comparison of the three months ended September 30, 2025 and 2024
The following table summarizes our results of operations for the three months ended September 30, 2025 and 2024, together with the changes in those items:
|
Three Months Ended September 30, |
Dollar Change | ||||||||||||||||
| (in thousands) | 2025 | 2024 | |||||||||||||||
| Collaboration revenue | $ | 11,009 | $ | 12,598 | $ | (1,589) | |||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 12,182 | 14,803 | (2,621) | ||||||||||||||
| General and administrative | 6,303 | 9,864 | (3,561) | ||||||||||||||
| Restructuring expenses | 191 | - | 191 | ||||||||||||||
| Total operating expenses | 18,676 | 24,667 | (5,991) | ||||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest income | 516 | 1,972 | (1,456) | ||||||||||||||
| Interest expense | (394) | (986) | 592 | ||||||||||||||
| Total other income, net | 122 | 986 | (864) | ||||||||||||||
| Loss before income taxes | (7,545) | (11,083) | 3,538 | ||||||||||||||
| Income tax expense | - | (418) | 418 | ||||||||||||||
| Net loss | $ | (7,545) | $ | (11,501) | $ | 3,956 | |||||||||||
Collaboration Revenue
Collaboration revenue decreased by $1.6 million, from $12.6 million for the three months ended September 30, 2024 to $11.0 million for the three months ended September 30, 2025. The decrease was primarily due to decreases in collaboration revenue recognized of $8.1 million and $1.5 million under the Johnson & Johnson Agreements and 2022 Merck KGaA Agreement, respectively, partially offset by an increase in collaboration revenue recognized of $8.1 million under the GSK Agreement primarily driven by milestone achievement.
Research and Development Expense
Research and development expense decreased by $2.6 million, from $14.8 million for the three months ended September 30, 2024 to $12.2 million for the three months ended September 30, 2025.
The decrease in research and development expense was primarily due to a decrease of $5.5 million related to employee compensation (including stock-based compensation), largely driven by reduced headcount, including as a result of the 2025 Restructuring, partially offset by increases of $1.7 million and $1.0 million related to clinical development activities for Emi-Le and XMT-2056, respectively.
General and Administrative Expense
General and administrative expense decreased by $3.6 million, from $9.9 million for the three months ended September 30, 2024 to $6.3 million for the three months ended September 30, 2025. The decrease in general and administrative expense was primarily due to a decrease of $2.4 million related to employee compensation (including stock-based compensation) as a result of reduced headcount, including as a result of the 2025 Restructuring, and a decrease of $1.2 million related to consulting and professional services fees.
Total Other Income, net
Total other income, net decreased by $0.9 million, from $1.0 million for the three months ended September 30, 2024 to $0.1 million for the three months ended September 30, 2025. The decrease was primarily due to less interest income earned on cash equivalents and marketable securities and the loss on extinguishment of debt resulting from the repayment of all amounts owed under the New Credit Facility, as defined below.
Comparison of the nine months ended September 30, 2025 and 2024
The following table summarizes our results of operations for the nine months ended September 30, 2025 and 2024:
|
Nine Months Ended September 30, |
Dollar Change | ||||||||||||||||
| (in thousands) | 2025 | 2024 | |||||||||||||||
| Collaboration revenue | $ | 16,819 | $ | 24,136 | $ | (7,317) | |||||||||||
| Operating expenses: | |||||||||||||||||
| Research and development | 46,741 | 50,734 | (3,993) | ||||||||||||||
| General and administrative | 22,643 | 31,927 | (9,284) | ||||||||||||||
| Restructuring expenses | 4,131 | - | 4,131 | ||||||||||||||
| Total operating expenses | 73,515 | 82,661 | (9,146) | ||||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest income | 2,575 | 6,839 | (4,264) | ||||||||||||||
| Interest expense | (1,843) | (2,971) | 1,128 | ||||||||||||||
| Total other income, net | 732 | 3,868 | (3,136) | ||||||||||||||
| Loss before income taxes | (55,964) | (54,657) | (1,307) | ||||||||||||||
| Income tax expense | - | (418) | 418 | ||||||||||||||
| Net loss | $ | (55,964) | $ | (55,075) | $ | (889) | |||||||||||
Collaboration Revenue
Collaboration revenue decreased by $7.3 million, from $24.1 million during the nine months ended September 30, 2024 to $16.8 million during the nine months ended September 30, 2025. The decrease was primarily due to decreases in collaboration revenue recognized of $11.9 million and $4.2 million under the Johnson & Johnson Agreements and 2022 Merck KGaA Agreement, respectively, partially offset by an increase in collaboration revenue recognized of $9.0 million under the GSK Agreement primarily driven by milestone achievement.
Research and Development Expense
Research and development expense decreased by $4.0 million, from $50.7 million for the nine months ended September 30, 2024 to $46.7 million for the nine months ended September 30, 2025. The decrease in research and development expense was primarily due to a decrease of $12.9 million related to employee compensation (including stock-based compensation), largely driven by reduced headcount, including as a result of the 2025 Restructuring, and a decrease of $1.3 million primarily related to favorable resolution of an accrual balance associated with UpRi clinical development and manufacturing activities, partially offset by increases of $6.4 million and $2.1 million related to clinical development activities for Emi-Le and XMT-2056, respectively, and an increase of $1.6 million related to CMC activities incurred for our collaboration partners.
General and Administrative Expense
General and administrative expense decreased by $9.3 million, from $31.9 million during the nine months ended September 30, 2024 to $22.6 million during the nine months ended September 30, 2025. The decrease in general and administrative expense was primarily due to a decrease of $5.8 million related to employee compensation (including stock-based compensation) as a result of reduced headcount, including as a result of the 2025 Restructuring, and a decrease of $3.5 million related to consulting and professional services fees.
Total Other Income, net
Total other income, net decreased by $3.1 million, from $3.9 million during the nine months ended September 30, 2024 to $0.7 million during the nine months ended September 30, 2025. The decrease was primarily due to less interest income earned on cash equivalents and marketable securities and the loss on extinguishment of debt resulting from the repayment of all amounts owed under the New Credit Facility.
Liquidity and Capital Resources
Sources of Liquidity
We have financed our operations to date primarily through our strategic collaborations, private placements of our convertible preferred stock and public offerings of our common stock, including our initial public offering, our follow-on public offerings in 2019 and 2020 and our ATM equity offering programs. As of September 30, 2025, we had cash and cash equivalents of $56.4 million. In addition to our existing cash and cash equivalents, we are eligible to earn milestone and other payments under our ongoing collaboration agreements with GSK, Johnson & Johnson and Merck KGaA. Our ability to earn the milestone payments and the timing of earning these amounts are dependent upon the timing and outcome of our development, regulatory and commercial activities and, as such, are uncertain at this time.
In November 2022, we entered into a sales agreement, or the November 2022 ATM, with Cowen and Company, LLC, or Cowen, as sales agent, under which we were able to offer and sell to the public through Cowen up to $150.0 million of our common stock from time to time at prevailing market prices. During the nine months ended September 30, 2024, we sold 41,467 shares of common stock under the November 2022 ATM, resulting in gross and net proceeds of $6.0 million and $5.8 million, respectively. As of December 31, 2024, the November 2022 ATM was no longer available for the offer and sale of additional shares of common stock due to the expiration of the applicable registration statement.
In February 2024, we entered into a sales agreement, or the February 2024 ATM, with Cowen, as sales agent, under which we are able to offer and sell to the public through Cowen up to $100.0 million of our common stock from time to time at prevailing market prices. We did not sell any shares of common stock pursuant to the February 2024 ATM during either of the nine months ended September 30, 2025 and 2024, and $100.0 million remained unsold and available for sale under the February 2024 ATM as of September 30, 2025.
On October 29, 2021, we entered into a loan and security agreement with Oxford Finance LLC as the collateral agent and a lender, Silicon Valley Bank, or former SVB, as a lender, and the other lenders from time to time a party thereto, or collectively the Lenders. In March 2023, Silicon Valley Bridge Bank, N.A., or SVBB, as successor in interest to former SVB, replaced former SVB as a Lender, and then Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, or SVB, which assumed all deposits and loans of SVBB, subsequently replaced SVBB as a lender. We refer to this loan and security agreement, as amended on February 17, 2022, October 17, 2022, December 27, 2022 and March 23, 2023, as the New Credit Facility.
On July 1, 2025, we entered into a letter agreement with the Lenders providing for our repayment of all amounts owed under the New Credit Facility. As of September 30, 2025 we had repaid our obligation of $25.0 million of principal, along with $1.1 million due for the final payment, under the New Credit Facility.
Cash Flows
The following table provides information regarding our cash flows for the nine months ended September 30, 2025 and 2024:
|
Nine Months Ended September 30, |
|||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Net cash used in operating activities | $ | (55,120) | $ | (63,089) | |||||||
| Net cash provided by (used in) investing activities | 27,767 | (38,563) | |||||||||
| Net cash (used in) provided by financing activities | (24,006) | 5,959 | |||||||||
| Decrease in cash, cash equivalents and restricted cash | $ | (51,359) | $ | (95,693) | |||||||
Net Cash Used in Operating Activities
Net cash used in operating activities was $55.1 million during the nine months ended September 30, 2025 and primarily consisted of a net loss of $56.0 million, adjusted for changes in our net working capital, deferred revenue related to our collaboration agreements, and other non-cash items, including stock-based compensation of $5.9 million. Net cash used in operating activities was $63.1 million during the nine months ended September 30, 2024 and primarily consisted of a net loss of $55.1 million, adjusted for changes in our net working capital, deferred revenue related to our collaboration agreements, and other non-cash items, including stock-based compensation of $13.1 million and net amortization of premiums and discounts on marketable securities of $3.3 million.
Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities was $27.8 million during the nine months ended September 30, 2025 as compared to net cash used in investing activities of $38.6 million during the nine months ended September 30, 2024. During the nine months ended September 30, 2025, net cash provided by investing activities consisted of maturities of marketable securities. During the nine months ended September 30, 2024, net cash used in investing activities consisted primarily of purchases of marketable securities, partially offset by maturities of marketable securities.
Net Cash (Used in) Provided by Financing Activities
Net cash used in financing activities was $24.0 million during the nine months ended September 30, 2025 as compared to net cash provided by financing activities of $6.0 million during the nine months ended September 30, 2024. During the nine months ended September 30, 2025, net cash used in financing activities consisted primarily of the repayment of debt including the final payment obligation. During the nine months ended September 30, 2024, net cash provided by financing activities consisted primarily of proceeds from sales of shares of common stock under our November 2022 ATM of $5.8 million.
Funding Requirements
We expect our cash expenditures to increase in connection with our ongoing activities, particularly as we continue the development and manufacturing of, conduct clinical trials of and seek marketing approval for our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to drug sales, marketing, manufacturing and distribution to the extent that such sales, marketing and distribution are not the responsibility of potential collaborators.
As of September 30, 2025, we had cash and cash equivalents of $56.4 million. We believe that our currently available funds will be sufficient to fund our current operating plan commitments into mid-2026. There is substantial doubt about our ability to continue as a going concern. If the acquisition of us by Parent is not consummated, we will need to raise additional funds, which could be through a combination of equity offerings, debt financings, other third-party funding, and strategic collaborations and licensing transactions. If we are unable to obtain future funding when needed, we may be forced to delay, reduce or eliminate some or all of our development programs, which could adversely affect our business prospects, or we may be unable to continue operations. There is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us to fund continuing operations, if at all.
Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:
•the successful completion of our pending transaction with Parent;
•the scope, progress, results and costs of developing Emi-Le and XMT-2056 and conducting clinical trials;
•the cost of manufacturing Emi-Le and XMT-2056 for clinical trials in preparation for regulatory approval and in preparation for commercialization;
•the timing of, and the costs involved in, obtaining regulatory approvals for Emi-Le and XMT-2056 if clinical trials are successful;
•the cost of commercialization activities for Emi-Le and XMT-2056, if such product candidates are approved for sale, including manufacturing, marketing, sales and distribution costs;
•our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;
•the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we obtain and the timing and receipt of any such payments;
•the timing, receipt and amount of sales of, or royalties on, our future products, if any, or products developed by our collaborators;
•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of any such litigation;
•the emergence of competing cancer therapies and other adverse market developments;
•the requirement for or the cost of developing any companion diagnostics and/or complementary diagnostics; and
•our ability to execute on our strategic priorities.
Drug development is a time-consuming, expensive and uncertain process that takes many years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve drug sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Until such time, if ever, that we can generate substantial product revenues, we expect to finance our cash needs through a combination of strategic collaborations, licensing arrangements, equity offerings and debt financings. We have the potential to earn cash milestone payments in connection with our ongoing agreements with GSK, Johnson & Johnson and Merck KGaA, if research and development activities are successful under our collaborations with those parties. If we raise funds through additional strategic collaborations or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us. If the acquisition of us by Parent is not consummated and we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Future additional debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
Contractual Obligations
During the nine months ended September 30, 2025, other than our early repayment of all amounts owed under the New Credit Facility, there were no material changes to our contractual obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 3, 2025.
Critical Accounting Estimates
Our management's discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates, if any, will be reflected in the financial statements prospectively from the date of change in estimates. During the nine months ended September 30, 2025, there were no material changes to our critical accounting estimates as reported under the heading "Critical Accounting Policies and Significant Judgements and Estimates" in Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on March 3, 2025.
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