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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 September 30, 2023
OR
    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)
Delaware04-3562403
(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 classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueMRSNThe 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 filerAccelerated filer
Non-accelerated filerSmaller 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 120,582,114 shares of Common Stock ($0.0001 par value per share) outstanding as of November 3, 2023.



Table of Contents
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, including our Phase 1 clinical trials of XMT-1660 and XMT-2056;
the adequacy of our inventory of XMT-1660, XMT-2056 and our other 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;
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;
unmet needs of patients with cancer indications;
our intellectual property position, including with respect to our trade secrets;
the potential benefits of strategic collaborations and our ability to enter into selective strategic collaborations;
our strategic priorities and our efforts to complete our restructuring plan announced on July 27, 2023; and
our estimates regarding expenses, future revenues, capital requirements, the sufficiency of our current and expected cash resources and our need for additional financing.
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 September 30, 2023, 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.
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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 a limited number of product candidates being evaluated 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 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.
Our restructuring and workforce reduction announced on July 27, 2023 may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.
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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.
Unfavorable global economic or geopolitical conditions could adversely affect our business, financial condition or results of operations.
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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)
September 30,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$186,283 $128,885 
Short-term marketable securities54,703 151,827 
Accounts receivable 30,000 
Prepaid expenses and other current assets8,752 8,507 
Total current assets249,738 319,219 
Property and equipment, net4,265 3,985 
Operating lease right-of-use assets8,423 10,475 
Other assets, noncurrent478 661 
Total assets$262,904 $334,340 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$12,946 $13,951 
Accrued expenses29,321 43,184 
Deferred revenue21,592 30,610 
Operating lease liabilities3,137 2,798 
Other current liabilities937 990 
Total current liabilities67,933 91,533 
Operating lease liabilities, noncurrent6,050 8,575 
Long-term debt, net25,155 24,929 
Deferred revenue, noncurrent111,504 117,043 
Other liabilities, noncurrent67 203 
Total liabilities210,709 242,283 
Commitments (Note 11)
Stockholders' equity:
Preferred stock, $0.0001 par value; 25,000,000 shares authorized; 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
  
Common stock, $0.0001 par value; 350,000,000 shares authorized; 120,548,980 and 105,144,864 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
12 11 
Additional paid-in capital858,999 746,889 
Accumulated other comprehensive income (loss)1 (152)
Accumulated deficit(806,817)(654,691)
Total stockholders’ equity52,195 92,057 
Total liabilities and stockholders’ equity$262,904 $334,340 

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
September 30,
Nine Months Ended
September 30,
2023202220232022
Collaboration revenue$7,698 $5,573 $26,154 $11,893 
Operating expenses:
Research and development30,531 50,639 126,774 127,676 
General and administrative12,894 14,573 49,409 42,158 
Restructuring expenses8,214  8,214  
Total operating expenses51,639 65,212 184,397 169,834 
Other income (expense):
Interest income3,302 708 9,142 1,017 
Interest expense(1,017)(880)(3,025)(2,364)
Total other income (expense), net2,285 (172)6,117 (1,347)
Net loss(41,656)(59,811)(152,126)(159,288)
Other comprehensive loss
Unrealized gain (loss) on marketable securities50 (105)153 (231)
Comprehensive loss$(41,606)$(59,916)$(151,973)$(159,519)
Net loss attributable to common stockholders — basic and diluted$(41,656)$(59,811)$(152,126)$(159,288)
Net loss per share attributable to common stockholders — basic and diluted$(0.35)$(0.61)$(1.33)$(1.75)
Weighted-average number of shares of common stock used in net loss per share attributable to common stockholders — basic and diluted120,521,985 97,641,936 114,595,910 91,173,989 

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 StockAdditional Paid-in CapitalAccumulated
Other Comprehensive
Income (Loss)
Accumulated
Deficit
Stockholders’
Equity
SharesAmount
Balance at December 31, 202173,709,056 $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 options26,951 — 96 — — 96 
Vesting of restricted stock units167,174 — — — — — 
Stock-based compensation expense— — 5,485 — — 5,485 
Net loss— — — — (47,258)(47,258)
Balance at March 31, 202287,073,084 $9 $638,254 $ $(497,737)$140,526 
Issuance of common stock from at-the-market transactions, net of issuance costs of $941
9,904,964 1 39,898 — — 39,899 
Exercise of common stock warrant16,654 — — — — — 
Vesting of restricted stock units17,417 — — — — — 
Purchase of common stock under ESPP154,235 — 606 — — 606 
Stock-based compensation expense— — 5,348 — — 5,348 
Other comprehensive loss— — — (126)— (126)
Net loss— — — — (52,219)(52,219)
Balance at June 30, 202297,166,354 $10 $684,106 $(126)$(549,956)$134,034 
Issuance of common stock from at-the-market transactions, net of issuance costs of $251
1,382,631 — 10,626 — — 10,626 
Exercise of stock options27,348 — 110 — — 110 
Vesting of restricted stock units6,250 — — — — — 
Stock-based compensation expense— — 5,375 — — 5,375 
Other comprehensive loss— — — (105)— (105)
Net loss— — — — (59,811)(59,811)
Balance at September 30, 202298,582,583 $10 $700,217 $(231)$(609,767)$90,229 
Balance at December 31, 2022105,144,864 $11 $746,889 $(152)$(654,691)$92,057 
Issuance of common stock from at-the-market transactions, net of issuance costs of $558
3,535,093 — 21,795 — — 21,795 
Exercise of stock options8,826 — 34 — — 34 
Vesting of restricted stock units372,291 — — — — — 
Stock-based compensation expense— — 6,407 — — 6,407 
Other comprehensive gain— — — 164 — 164 
Net loss— — — — (56,163)(56,163)
Balance at March 31, 2023109,061,074 $11 $775,125 $12 $(710,854)$64,294 
Issuance of common stock from at-the-market transactions, net of issuance costs of $1,524
10,929,438 1 71,874 — — 71,875 
Exercise of stock options88,770 — 393 — — 393 
Vesting of restricted stock units88,690 — — — — — 
Purchase of common stock under ESPP291,260 — 963 — — 963 
Stock-based compensation expense— — 6,643 — — 6,643 
Other comprehensive loss— — — (61)— (61)
Net loss— — — — (54,307)(54,307)
Balance at June 30, 2023120,459,232 $12 $854,998 $(49)$(765,161)$89,800 
Vesting of restricted stock units and other stock awards89,748 — — — — — 
Stock-based compensation expense— — 4,001 — — 4,001 
Other comprehensive gain— — — 50 — 50 
Net loss— — — — (41,656)(41,656)
Balance at September 30, 2023120,548,980 $12 $858,999 $1 $(806,817)$52,195 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Mersana Therapeutics, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
20232022
Cash flows from operating activities
Net loss$(152,126)$(159,288)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation1,070 645 
Net amortization of premiums and discounts on marketable securities(4,239)(396)
Stock-based compensation17,051 16,208 
Other non-cash items536 574 
Changes in operating assets and liabilities:
Accounts receivable30,000  
Prepaid expenses and other current assets(244)2,459 
Accounts payable(659)1,153 
Accrued expenses(13,617)11,848 
Operating lease right-of-use assets2,051 2,127 
Operating lease liabilities(2,186)(1,861)
Deferred revenue(14,557)128,397 
Net cash (used in) provided by operating activities(136,920)1,866 
Cash flows from investing activities
Maturities of marketable securities232,970 54,000 
Purchase of marketable securities(131,453)(159,878)
Purchase of property and equipment(1,782)(1,412)
Net cash provided by (used in) investing activities99,735 (107,290)
Cash flows from financing activities
Net proceeds from at-the-market facilities93,539 110,954 
Proceeds from exercise of stock options427 206 
Proceeds from purchases of common stock under ESPP963 606 
Payment of debt issuance costs(150) 
Payments under finance lease obligations(196)(207)
Net cash provided by financing activities94,583 111,559 
Increase in cash, cash equivalents and restricted cash57,398 6,135 
Cash, cash equivalents and restricted cash, beginning of period129,363 178,425 
Cash, cash equivalents and restricted cash, end of period$186,761 $184,560 
Supplemental disclosures of non-cash activities:
Purchases of property and equipment in accounts payable and accrued expenses$442 $407 
Cash paid for interest$2,508 $1,746 
Right-of-use assets obtained in exchange for operating lease liabilities$ $298 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements
(unaudited)

1. Nature of business and basis of presentation
Mersana Therapeutics, Inc. is a clinical-stage biopharmaceutical company focused on developing antibody-drug conjugates ("ADCs") that offer a clinically meaningful benefit for cancer patients with significant unmet need. The Company has leveraged over 20 years of industry learning in the ADC field to develop proprietary and differentiated platforms that enable it to develop ADCs that are designed to have improved efficacy, safety and tolerability relative to existing ADCs and other approved therapies. The Company’s next-generation platforms include Dolasynthen, which delivers a proprietary auristatin payload, and Immunosynthen, which delivers a proprietary stimulator of interferon genes ("STING") agonist payload.
The Company is investigating XMT-1660, a B7-H4-directed Dolasynthen ADC, in a Phase 1 clinical trial enrolling patients with solid tumors, including in breast, endometrial and ovarian cancers. The Company initiated a Phase 1 clinical trial to investigate XMT-2056, an Immunosynthen STING-agonist ADC that is designed to target a novel epitope of human epidermal growth factor receptor 2 ("HER2"), in January 2023, enrolling previously treated patients with advanced/recurrent solid tumors expressing HER2, including breast, gastric, colorectal and non-small cell lung cancers. In March 2023, following a voluntary suspension of this clinical trial by the Company, this clinical trial was placed on clinical hold by the U.S. Food and Drug Administration ("FDA"), and the FDA lifted this clinical hold in October 2023. The Company also has two additional earlier stage preclinical candidates, XMT-2068 and XMT-2175, that leverage the Company's Immunosynthen platform.
In July 2023, the Company announced top-line data from its Phase 2 UPLIFT clinical trial of upifitamab rilsodotin ("UpRi"), which did not meet its primary endpoint. In connection with this announcement, on July 27, 2023, the Company further announced that its primary focus moving forward would be on advancing product candidates and collaborations utilizing its next-generation ADC platforms, Dolasynthen and Immunosynthen. As a result, the Company is winding down its UpRi-related development activities and its regulatory and commercial readiness efforts and has terminated its Phase 3 clinical UP-NEXT and UPGRADE-A clinical trials of UpRi, on which the FDA had placed a partial clinical hold in June 2023.
The Company is subject to risks common to companies in the biotechnology industry including, but not limited to, the need for additional capital, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval and reimbursement for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development of technological innovations by competitors, reliance on third party manufacturers and the ability to transition from pilot-scale production to large-scale manufacturing of products.
The Company has incurred cumulative net losses since inception. For the three months ended September 30, 2023, the net loss was $41.7 million, compared to $59.8 million in the three months ended September 30, 2022. For the nine months ended September 30, 2023, the net loss was $152.1 million, compared to $159.3 million in the nine months ended September 30, 2022. The Company expects to continue to incur operating losses for at least the next several years. As of September 30, 2023, the Company had an accumulated deficit of $806.8 million. The future success of the Company is dependent on, among other factors, its ability to identify and develop its product candidates and ultimately upon its ability to attain profitable operations. The Company has devoted substantially all of its financial resources and efforts to research and development and general and administrative expense to support such research and development. Net losses and negative operating cash flows have had, and will continue to have, an adverse effect on the Company’s stockholders' equity and working capital.
The Company believes that its currently available funds will be sufficient to fund the Company’s operations through at least the next twelve months from the issuance of this Quarterly Report on Form 10-Q. Management’s belief with respect to its ability to fund operations is based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional funding.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and the rules and regulations of the Securities and Exchange Commission ("SEC"). Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification ("ASC") and Accounting Standards Updates ("ASU") of the Financial Accounting Standards Board ("FASB").
Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2022 and the notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 28, 2023.
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position as of September 30, 2023, the results of its operations for the three and nine months ended September 30, 2023 and 2022, the statements of stockholders’ equity for the three and nine months ended September 30, 2023 and 2022 and statements of cash flows for the nine months ended September 30, 2023 and 2022. Such adjustments are of a normal and recurring nature. The results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results for the year ending December 31, 2023, or for any future period.

2. Summary of significant accounting policies
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include those of the Company and its wholly owned subsidiary, Mersana Securities Corp. All intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity, revenue, expenses and related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company’s management evaluates its estimates which include, but are not limited to, management’s judgments with respect to the identification of performance obligations and standalone selling prices of those performance obligations within its revenue arrangements, accrued preclinical, manufacturing and clinical expenses, valuation of stock-based awards and income taxes. Actual results could differ from those estimates.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker, or decision making group, in deciding how to allocate resources and assess performance. The Company views its operations and manages its business as a single operating segment, which is the business of discovering and developing ADCs.
Summary of Accounting Policies
The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, 2023 are consistent with those discussed in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
Fair Value Measurements
Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability between market participants at measurement dates. ASC 820, Fair Value Measurement, establishes a three-level valuation hierarchy for instruments measured at fair value. The hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
Level 1—Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2—Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3—Inputs to the valuation methodology are unobservable and significant to the fair value measurement.
Concentration of Credit Risk and Off-balance Sheet Risk
Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash equivalents and marketable securities. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. The Company does not believe that it is subject to any significant concentrations of credit risk from these financial instruments. The Company has no financial instruments with off-balance sheet risk, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements.
Cash and Cash Equivalents
The Company considers all highly-liquid investments with an original maturity, or a remaining maturity at the time of purchase, of three months or less to be cash equivalents. The Company invests excess cash primarily in money market funds, commercial paper and government agency securities, which are highly liquid and have strong credit ratings. The Company determined that these investments are subject to minimal credit and market risks. Cash and cash equivalents are stated at cost, which approximates market value.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards have or may have a material impact on the Company's condensed consolidated financial statements or disclosures.

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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
3. Collaboration agreements
GSK
On August 6, 2022, the Company entered into a Collaboration, Option and License Agreement (the "GSK Agreement") with GlaxoSmithKline Intellectual Property (No. 4) Limited ("GSK"), pursuant to which the Company granted GSK an exclusive option to obtain an exclusive license (the “Option”) to co-develop and to commercialize products containing XMT-2056 (the "Licensed Products"), exercisable within a specified time period (the “Option Period”) after the Company delivers to GSK data resulting from completion of dose escalation with enrichment for breast cancer patients in a Phase 1 single-agent clinical trial of XMT-2056. GSK’s exercise of the Option may require clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR Clearance” and GSK’s exercise of the Option following any applicable HSR Clearance, the “GSK Option Exercise”). Prior to the GSK Option Exercise, the Company will lead and will be responsible for the costs of manufacturing, research, and early clinical development related to its XMT-2056 program.
Pursuant to the GSK Agreement, GSK paid the Company a non-refundable, upfront fee of $100.0 million in August 2022. Following the GSK Option Exercise, if any, GSK is obligated to pay the Company an option exercise payment of $90.0 million (the "Option Payment").
The GSK Agreement will terminate at the end of the Option Period if GSK does not exercise its Option. In the event of the GSK Option Exercise, unless earlier terminated, the GSK Agreement will continue in effect until the date on which the royalty term and all payment obligations with respect to all Licensed Products in all countries have expired.
Accounting Analysis
The Company assessed the GSK Agreement in accordance with ASC 606 and concluded that the contract counterparty, GSK, is a customer. The Company identified the following two material performance obligations under the GSK Agreement: (i) development activities, including manufacturing, research and early clinical development activities, necessary to deliver the package of data, information and materials specified in the GSK agreement (the "Development Activities") and (ii) the Option to co-develop and to commercialize Licensed Products (the "License Option").
The Company is recognizing revenue related to the Development Activities performance obligation over the estimated period of the pre-option development using a proportional performance model as the underlying activities are performed. The Company measures proportional performance based on the costs incurred relative to the total costs expected to be incurred.
The Company deferred revenue recognition related to the License Option. If the License Option is exercised and GSK obtains an exclusive license, the Company will recognize revenue as it fulfills its obligations under the GSK Agreement. If the Option is not exercised, the Company will recognize the entirety of the revenue in the period when the Option expires.
During the three months ended September 30, 2023 and 2022 and the nine months ended September 30, 2023 and 2022 the Company recorded collaboration revenue of $0.5 million, $0.7 million, $1.8 million, and $0.7 million respectively, related to its efforts under the GSK Agreement. As of September 30, 2023 and December 31, 2022 the Company had recorded $96.2 million and $98.0 million, respectively, in deferred revenue related to the unsatisfied performance obligations under the GSK Agreement. This deferred revenue will be recognized over the remaining performance period and classified as current or noncurrent on the consolidated balance sheets based upon the expected timing of satisfaction of the performance obligations.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
Janssen
In February 2022, the Company entered into a research collaboration and license agreement with Janssen Biotech Inc. ("Janssen" and such agreement, as amended on July 14, 2023 and September 25, 2023, the "Janssen Agreement") focused on the research, development and commercialization of novel ADCs for three oncology targets by leveraging Mersana’s ADC expertise and Dolasynthen platform with Janssen’s proprietary antibodies. Upon execution of the Janssen Agreement, the Company received a non-refundable upfront payment of $40.0 million from Janssen. Janssen may select up to three targets and may substitute each target once prior to a substitution deadline. Janssen is not required to pay a fee for its first substitution right, but must pay a one-time fee for access to the subsequent substitution rights following its exercise of its second substitution right.
Pursuant to mutually agreed research and CMC plans, the Company will perform bioconjugation, production development, preclinical manufacturing, and certain related research and preclinical development activities, in order to progress the targets through investigational new drug application ("IND") submission for further development, manufacture and commercialization by Janssen. The Company estimates that its activities under the research plans for the targets will be performed through 2024.
The Company's CMC activities will be compensated by Janssen at agreed upon rates. Unless earlier terminated, the Janssen Agreement will expire upon the expiration of the last royalty term for a product under the Janssen Agreement.
Janssen may request that the Company perform clinical manufacturing services under a separate clinical supply agreement. Janssen may also request that the Company perform a technology transfer of bioconjugation and manufacturing process technology, at Janssen's cost, at an agreed upon rate.
Accounting Analysis
The Company assessed the Janssen Agreement in accordance with ASC 606 and concluded that the contract counter party, Janssen, is a customer. The Company identified the following seven material performance obligations under the Janssen Agreement: (i) exclusive Janssen Licenses and research activities for each of the three designated targets, (ii) CMC activities for each of the three designated targets and (iii) the first target substitution right.
The Company determined that the consideration for CMC activities represents variable consideration. CMC activities for one of the three designated targets have been initiated. The Company has included limited cost reimbursements within the transaction price. The Company elected to apply the Right to Invoice practical expedient under ASC 606. As such, the Company will recognize revenue related to the CMC activities when the services are performed.
As of September 30, 2023, the revised total transaction price for the Janssen Agreement was $48.0 million. During 2023, the Company revised the estimated transaction price by $6.0 million based on the reassessment of the constraint of certain development milestones and the remaining risks associated with the development required to achieve the milestones.
The Company is recognizing revenue related to the Janssen Licenses and research services performance obligation over the estimated period of the research services using a proportional performance model. The Company measures proportional performance based on the costs incurred relative to the total costs expected to be incurred.
The Company recognizes revenue related to the first target substitution right over time in congruence with the Janssen Licenses and research activities, upon the exercise of the option. If the first target substitution option is not exercised, the Company will recognize the entirety of the revenue in the period when the option expires.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
During the three months ended September 30, 2023 and 2022 and the nine months ended September 30, 2023 and 2022, the Company recorded collaboration revenue of $4.9 million, $4.9 million, $14.0 million, and $10.9 million, respectively, related to its performance obligations under the Janssen Agreement. As of September 30, 2023 and December 31, 2022, the Company had recorded $9.9 million and $15.8 million, respectively, in deferred revenue related to the Janssen Agreement that will be recognized over the remaining performance period and classified as current or noncurrent on the consolidated balance sheets based upon the expected timing of satisfaction of respective performance obligations.
Merck KGaA and affiliates
Immunosynthen Platform Agreement
In December 2022, the Company entered into a research collaboration and license agreement with Ares Trading S.A. ("MRKDG" and such agreement, the "2022 Merck KGaA Agreement"), a wholly owned subsidiary of Merck KGaA, Darmstadt, Germany, focused on the research, development and commercialization of novel ADCs for up to two specific target antigens by leveraging Mersana’s ADC expertise and Immunosynthen platform with MRKDG’s proprietary antibodies. In connection with the 2022 Merck KGaA Agreement, the Company received a non-refundable upfront payment of $30.0 million. Pursuant to the 2022 Merck KGaA Agreement, the Company granted MRKDG two exclusive, non-transferable, worldwide licenses - a research license and a commercialization license (together, the "MRKDG Licenses").
Pursuant to mutually agreed research and CMC plans, the Company will perform bioconjugation, production development, preclinical manufacturing, and certain related research and preclinical development activities, in order to progress the targets through IND (or foreign equivalent) submission for further development, manufacture and commercialization by MRKDG. The Company estimates that its activities under the research plans for the targets will be performed through 2026.
The Company's CMC activities will be compensated by MRKDG at agreed upon rates. Unless earlier terminated, the 2022 Merck KGaA Agreement will expire upon the expiration of the last royalty term for a product under the 2022 Merck KGaA Agreement.
MRKDG may request that the Company perform clinical manufacturing services under a separate clinical supply agreement. MRKDG may also request that the Company perform a technology transfer of bioconjugation technology, at MRKDG's cost, at an agreed upon rate.
Accounting Analysis
The Company assessed the 2022 Merck KGaA Agreement in accordance with ASC 606 and concluded that the contract counter party, MRKDG, is a customer. The Company identified the following four material performance obligations under the 2022 Merck KGaA Agreement: (i) exclusive MRKDG Licenses and research activities for each of the two designated targets and (ii) CMC activities for each of the two designated targets.
The Company is recognizing revenue related to the MRKDG Licenses and research services performance obligation over the estimated period of the research services using a proportional performance model. The Company measures proportional performance based on the costs incurred relative to the total costs expected to be incurred.
During the three and nine months ended September 30, 2023, the Company recorded collaboration revenue of $2.3 million and $7.9 million, respectively, related to its efforts under the 2022 Merck KGaA Agreement. As of September 30, 2023 and December 31, 2022, the Company had recorded $23.1 million and $30.0 million, respectively, in deferred revenue related to the unsatisfied performance obligations under the 2022 Merck KGaA Agreement. This deferred revenue will be recognized over the remaining performance period and classified as current or noncurrent on the consolidated balance sheets based upon the expected timing of satisfaction of respective performance obligations.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
Dolaflexin Platform Agreement
In June 2014, the Company entered into a collaboration and commercial license agreement with Merck KGaA (the "2014 Merck KGaA Agreement"). Upon the execution of the 2014 Merck KGaA Agreement, Merck KGaA paid the Company a non-refundable technology access fee of $12.0 million for the right to develop ADCs directed to six exclusive targets over a specified period of time. No additional fees are due when a target is designated and the commercial license to the target is granted. Merck KGaA will be responsible for the product development and marketing of any products resulting from this collaboration. 
Under the terms of the 2014 Merck KGaA Agreement, the Company and Merck KGaA develop research plans to evaluate Merck KGaA's antibodies as ADCs incorporating the Company's technology. The Company receives reimbursement for its efforts under the research plans. The goal of the research plans is to provide Merck KGaA with sufficient information to formally nominate a development candidate and begin IND-enabling studies.
All six targets were designated prior to 2018. The Company has previously received $3.0 million related to development milestones under the 2014 Merck KGaA Agreement. There have been no additional milestone payments during the nine months ended September 30, 2023 or 2022.
In May 2018, the Company entered into a Supply Agreement with Merck KGaA (the "2018 Merck KGaA Supply Agreement"). Under the terms of the 2018 Merck KGaA Supply Agreement, the Company will provide Merck KGaA preclinical non-good manufacturing practice ("non-GMP") ADC drug substance and clinical good manufacturing practice ("GMP") drug substance for use in clinical trials associated with one of the antibodies designated under the 2014 Merck KGaA Agreement. The Company receives fees for its efforts under the 2018 Merck KGaA Supply Agreement and reimbursement equal to the supply cost. The Company may also enter into future supply agreements to provide clinical supply material should Merck KGaA pursue clinical development of any other candidates nominated under the 2014 Merck KGaA Agreement.
Accounting Analysis
The Company concluded that Merck KGaA is a customer and accounted for the 2014 Merck KGaA Agreement in accordance with ASC 606. The Company identified the following performance obligations under the 2014 Merck KGaA Agreement: (i) exclusive license and research services for six designated targets, (ii) rights to future technological improvements and (iii) participation of project team leaders and providing joint research committee services.
The Company is recognizing revenue related to the exclusive license and research and development services performance obligation over the estimated period of the research and development services using a proportional performance model. The Company measures proportional performance based on the costs incurred relative to the total costs expected to be incurred. To the extent that the Company receives fees for the research services as they are performed, these amounts are recorded as deferred revenue. Revenue related to future technological improvements and joint research committee services will be recognized ratably over the performance period (which in the case of the joint research committee services approximate the time and cost incurred each period), which are 10 and 5 years, respectively. The Company is continuing to reassess the estimated remaining term at each subsequent reporting period.
As of September 30, 2023, the Company has completed its research service obligations associated with four of the six designated targets and the joint research committee services. Collaboration revenue recognized during the three months ended September 30, 2023 and 2022 was immaterial. There was no collaboration revenue or corresponding research and development expense recognized during the three and nine months ended September 30, 2023 and 2022 related to the 2018 Merck KGaA Supply Agreement.
As of September 30, 2023 and December 31, 2022, the Company had recorded $3.9 million in deferred revenue related to the 2014 Merck KGaA Agreement and 2018 Merck KGaA Supply Agreement, in the aggregate, that will be recognized over the remaining performance period.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
Summary of Contract Assets and Liabilities
The following table presents changes in the balances of the Company's contract liabilities:
Balance at
Beginning
of Period
Additions
Deductions
Balance at
End of Period
Nine months ended September 30, 2023
Contract liabilities:
Total deferred revenue$147,653 $1,710 $16,267 $133,096 
Nine months ended September 30, 2022
Contract liabilities:
Total deferred revenue$3,944 $140,000 $11,603 $132,341 
The Company had no contract assets associated with its collaboration agreements as of September 30, 2023 and September 30, 2022.
During the three and nine months ended September 30, 2023 and 2022, the Company recognized the following revenues as a result of changes in the contract liability balances in the respective periods:
Three months ended September 30,Nine months ended September 30,
2023202220232022
Revenue recognized in the period from:
Amounts included in the contract liability at the beginning of the period$4,503 $4,919 $17,963 $32 
Other Revenue
The Company has provided limited services for a collaborator, Asana BioSciences, LLC ("Asana Biosciences"). The Company did not recognize revenue related to these services during the three and nine months ended September 30, 2023 and the three months ended September 30, 2022. During the nine months ended September 30, 2022 the Company recognized revenue of $0.3 million related to these services. During the nine months ended September 30, 2023, the Company recognized revenue of $2.5 million related to achievement of a development milestone under the research, development and license agreement for which performance obligations were previously completed.

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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
4. Fair value measurements
The following table presents information about the Company's assets measured at fair value on a recurring basis and indicates the level within fair value hierarchy of the valuation techniques utilized to determine such value.
September 30, 2023
(in thousands)TotalQuoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Cash equivalents
Money market funds$137,795 $137,795 $ $ 
Marketable securities
U.S. treasury securities$29,811 $29,811 $ $ 
U.S. government agency securities24,892  24,892  
$54,703 $29,811 $24,892 $ 
December 31, 2022
(in thousands)TotalQuoted Prices
in Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Cash equivalents
Money market funds$50,471 $50,471 $ $ 
U.S. government agency securities9,993  9,993  
$60,464 $50,471 $9,993 $ 
Marketable securities
U.S. treasury securities$107,810 $107,810 $ $ 
U.S. government agency securities44,017  44,017  
$151,827 $107,810 $44,017 $ 
There were no changes in valuation techniques or transfers between fair value measurement levels during the nine months ended September 30, 2023 or during the year ended December 31, 2022.
Investments classified as Level 1 within the valuation hierarchy generally consist of U.S. treasury securities and money market funds, as the fair value is readily determinable based on active daily markets for identical securities. Investments classified as Level 2 within the valuation hierarchy generally consists of U.S. government agency securities, as the fair value is readily determinable based on active daily markets for similar securities and other observable inputs. The Company estimates the fair values of investments by taking into consideration valuations obtained from third-party pricing sources.
The carrying amounts reflected in the consolidated balance sheets for prepaid expenses and other current assets, accounts receivable, accounts payable and accrued expenses approximate their fair values due to their short-term nature.
As of September 30, 2023 and December 31, 2022, the carrying value of the Company’s outstanding borrowing under the New Credit Facility (as defined in Note 7, Debt) approximated fair value (a Level 2 fair value measurement), reflecting interest rates currently available to the Company. The New Credit Facility is discussed in more detail in Note 7, Debt.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)

5. Cash, cash equivalents, and short-term marketable securities
Cash and cash equivalents
The following table summarizes the Company's cash, cash equivalents, and restricted cash as of September 30, 2023 and 2022.
Nine Months Ended
September 30, 2023
Nine Months Ended
September 30, 2022
(in thousands)Beginning
of period
End
of period
Beginning
of period
End
of period
Cash and cash equivalents$128,885 $186,283 $177,947 $184,082 
Restricted cash included in other assets, noncurrent478 478 478 478 
Total cash, cash equivalents and restricted cash per statement of cash flows$129,363 $186,761 $178,425 $184,560 
Marketable securities
The following tables summarize the Company's marketable securities held at September 30, 2023 and December 31, 2022.
September 30, 2023
(in thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Marketable securities
U.S. treasury securities$29,807 $13 $(9)$29,811 
U.S. government agency securities24,895 4 (7)24,892 
Total$54,702 $17 $(16)$54,703 
December 31, 2022
(in thousands)Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Marketable securities
U.S. treasury securities$107,964 $7 $(161)$107,810 
U.S. government agency securities44,016 24 (23)44,017 
Total$151,980 $31 $(184)$151,827 
All of the Company's marketable securities are due within one year or less. The Company did not realize any gains or losses recognized on the sale of marketable securities during the nine months ended September 30, 2023, and, as a result, the Company did not reclassify any amounts out of accumulated comprehensive loss.
As of September 30, 2023, the Company's debt security portfolio consisted of 5 securities that were in an unrealized loss position and had an aggregate fair value of $29.9 million. There were no securities in an unrealized loss position for greater than 12 months as of September 30, 2023. The unrealized losses on the Company's marketable securities were caused by market interest rate increases. The Company has the intent and ability to hold such securities until recovery. As a result, the Company did not record any charges for credit-related impairments for its marketable debt securities for the three months ended September 30, 2023.

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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
6. Accrued expenses
Accrued expenses consisted of the following as of September 30, 2023 and December 31, 2022:
(in thousands)September 30,
2023
December 31,
2022
Accrued clinical expenses$8,544 $14,822 
Accrued payroll and related expenses7,168 11,558 
Accrued manufacturing expenses4,250 11,536 
Accrued restructuring expenses4,190  
Accrued research and non-clinical expenses3,062 2,767 
Accrued professional fees1,583 1,865 
Accrued other524 636 
$29,321 $43,184 

7. Debt
On October 29, 2021, the Company entered into a loan and security agreement (the "New Credit Facility") with Silicon Valley Bank ("former SVB") and Oxford Finance LLC ("Oxford" and, together with former SVB and the other lenders from time to time a party thereto, the "Lenders"). In March 2023, Silicon Valley Bridge Bank, N.A ("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 ("SVB"), which assumed all deposits and loans of SVBB, subsequently replaced SVBB as a Lender. The New Credit Facility as amended on February 17, 2022, October 17, 2022, December 27, 2022, and March 23, 2023, is secured by substantially all of the Company's personal property owned or later acquired, excluding intellectual property (but including the rights to payments and proceeds from intellectual property), and a negative pledge on intellectual property. The Company has drawn $25.0 million under the New Credit Facility as of September 30, 2023. As of September 30, 2023, no additional borrowing amounts were available to the Company under the New Credit Facility, as amended.
Refer to Note 8, Debt, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for more information regarding the New Credit Facility. As of September 30, 2023, the Company was in compliance with all covenants under the New Credit Facility. There are no events of default under the New Credit Facility as of September 30, 2023.
The following is a summary of obligations under the New Credit Facility as of September 30, 2023:
(in thousands)September 30,
2023
Total debt$25,000 
Less: Current portion of long-term debt 
Total debt, net of current portion25,000 
Debt financing costs, net of accretion(259)
Accretion related to final payment414 
Long-term debt, net$25,155 
Interest expense related to the New Credit Facility for the three months ended September 30, 2023 and 2022 and nine months ended September 30, 2023 and 2022 was $1.0 million, $0.8 million, $2.9 million, and $2.3 million, respectively.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)

8. Stockholders’ equity
Preferred stock
As of September 30, 2023, the Company had 25,000,000 shares of authorized preferred stock. No shares of preferred stock have been issued.
At-the-market ("ATM") equity offering program
In May 2020, the Company established an ATM equity offering program (the "2020 ATM"), pursuant to which it was able to offer and sell up to $100.0 million of its common stock from time to time at prevailing market prices. During the first quarter of 2022, the Company sold 11,740,210 shares of common stock under the 2020 ATM, resulting in net proceeds of $54.8 million. As of March 31, 2022, the 2020 ATM had been fully utilized.
In February 2022, the Company established a new ATM equity offering program (the "February 2022 ATM"), pursuant to which it was able to offer and sell up to $100.0 million of its common stock from time to time at prevailing market prices. During the nine months ended September 30, 2022, the Company sold 12,717,288 shares of common stock under the February 2022 ATM, resulting in net proceeds of $56.5 million. During the first quarter of 2023, the Company sold 256,386 shares of common stock under the February 2022 ATM, resulting in net proceeds of $1.6 million. As of March 31, 2023, the February 2022 ATM had been fully utilized.
In November 2022, the Company established an additional ATM equity offering program (the "November 2022 ATM"), pursuant to which it is able to offer and sell up to $150.0 million of its common stock from time to time at prevailing market prices. During the nine months ended September 30, 2023, the Company sold 14,208,145 shares of common stock under the November 2022 ATM, resulting in net proceeds of $92.2 million. As of September 30, 2023, approximately $55.9 million remained unsold and available for sale under the November 2022 ATM.
Warrants
In connection with a 2013 Series A-1 Preferred Stock issuance, the Company granted to certain investors warrants to purchase shares of common stock. All such outstanding warrants expired pursuant to their terms on September 27, 2023. The warrants had a $0.05 per share exercise price and a contractual life of 10 years. The fair value of these warrants was recorded as a component of equity at the time of issuance. There were no warrants to purchase shares of common stock outstanding as of September 30, 2023. During the nine months ended September 30, 2023, there were no exercises of warrants in exchange for shares of common stock.
Common stock
At the Company's 2022 Annual Meeting of Stockholders on June 9, 2022, the Company's stockholders approved an amendment to the Company’s Fifth Amended and Restated Certificate of Incorporation to increase the number of authorized shares of common stock, $0.0001 par value per share, from 175,000,000 to 350,000,000. This increase became effective upon filing of a Certificate of Amendment with the Secretary of State of the State of Delaware on June 9, 2022.
The holders of the common stock are entitled to one vote for each share held. Common stockholders are not entitled to receive dividends, unless declared by the Board of Directors of the Company (the "Board").
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
As of September 30, 2023 and December 31, 2022, there were 16,300,491 and 11,944,664, respectively, shares of common stock reserved for the exercise of outstanding stock options, restricted stock units ("RSUs") and warrants.
September 30,
2023
December 31,
2022
Stock options12,178,126 10,051,283 
Restricted stock units4,122,365 1,870,791 
Warrants 22,590 
16,300,491 11,944,664 

9. Stock-based compensation
Stock incentive plans
Prior to its initial public offering, the Company granted stock options pursuant to the Company’s 2007 Stock Incentive Plan (the "2007 Plan"). The 2007 Plan expired in June 2017. Any cancellations or forfeitures of options granted under the 2007 Plan will increase the options available under the 2017 Stock Incentive Plan (the "2017 Plan"), as described below.
In June 2017, the Company’s stockholders approved the 2017 Plan. Under the 2017 Plan, shares of common stock could be granted to the Company's employees, officers, directors, consultants and advisors in the form of options, RSUs or other stock-based awards. The number of shares of common stock issuable under the 2017 Plan will be cumulatively increased annually on January 1 by the lesser of (a) 4% of the outstanding shares on the immediately preceding December 31 or (b) such other amount specified by the Board. The terms of the awards are determined by the Board, subject to the provisions of the 2017 Plan. Any cancellations or forfeitures of options granted under the 2007 Plan, which expired in June 2017, would increase the number of shares that could be granted under the 2017 Plan. On January 1, 2023, the number of shares of common stock issuable under the 2017 Plan was increased by 4,205,794 shares. During the nine months ended September 30, 2023, the Company granted an aggregate of 7,107,900 RSUs, options to purchase shares of common stock, and shares of common stock to employees and non-employee directors under the 2017 Plan. As of September 30, 2023, there were 864,450 shares available for future issuance under the 2017 Plan.
Under the 2017 Plan, with respect to both incentive stock options and nonqualified stock options, the exercise price per share will not be less than the fair market value of the common stock on the date of grant and the vesting period for options granted to employees is generally four years. Options granted under the 2017 Plan expire no later than 10 years from the date of grant. Options under the 2007 Plan were granted at an exercise price established by the Board (or an authorized committee thereof) that was not less than the fair market value of the underlying common stock on the date of grant and subject to such vesting provisions determined by the Board (or an authorized committee thereof). The Board may accelerate vesting or otherwise adjust the terms of granted options in the case of a merger, consolidation, dissolution, or liquidation of the Company.
Inducement awards
From time to time, the Company grants to its employees, upon approval by the Board or an authorized committee thereof, options to purchase shares of common stock and/or RSUs as an inducement to employment in accordance with Nasdaq Listing Rule 5635(c)(4). Prior to February 2022, only options were granted, and they were granted outside of an existing equity incentive plan. These options are subject to terms substantially the same as the 2017 Plan.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
In February 2022, the Board adopted the Company's 2022 Inducement Stock Incentive Plan (the "Inducement Plan"), which provides for the grant of nonstatutory options, stock appreciation rights, restricted stock, RSUs and other stock-based awards, with respect to an aggregate of 2,000,000 shares of the Company's common stock (subject to adjustment as provided in the Inducement Plan). During the nine months ended September 30, 2023, the Company granted an aggregate of 865,370 RSUs and options to purchase shares of common stock to newly hired employees under the Inducement Plan. As of September 30, 2023, there were 1,058,609 shares available for future issuance under the Inducement Plan.
As of September 30, 2023, there were options to purchase 657,500 shares of common stock outstanding which were granted as inducement awards prior to the establishment of the Inducement Plan.
Stock option activity
A summary of stock option activity is as follows:
Number
of Shares
Weighted-
Average
Exercise Price
Outstanding at January 1, 202310,051,283 $9.84 
Granted3,972,166 $4.80 
Exercised(97,596)$4.37 
Cancelled/forfeited(1,747,727)$10.62 
Outstanding at September 30, 202312,178,126 $8.13 
Exercisable at September 30, 20237,130,744 $9.25 
The weighted-average grant date fair value of options granted during the nine months ended September 30, 2023 and 2022 was $3.85 and $3.96 per share, respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2023 and 2022 was $0.3 million and immaterial, respectively. The aggregate intrinsic value represents the difference between the exercise price and the selling price received by option holders upon the exercise of stock options during the period.
Cash received from the exercise of stock options was $0.4 million and immaterial, respectively, for the nine months ended September 30, 2023 and 2022.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
Restricted stock units
The Company periodically issues RSUs with a service condition to certain officers and other employees that typically vest between one year and four years from the grant date.
A summary of the RSU activity is as follows:
Number of Shares
Unvested at January 1, 20231,870,791 
Granted3,982,567 
Vested(532,192)
Forfeited(1,198,801)
Unvested at September 30, 20234,122,365 
Employee stock purchase plan
During the year ended December 31, 2017, the Board adopted, and the Company’s stockholders approved the 2017 employee stock purchase plan (the "2017 ESPP"). The number of shares of common stock issuable under the 2017 ESPP was increased by 450,000 on January 1, 2023. The Company issued 291,260 and 154,235 shares, respectively, under the 2017 ESPP during the nine months ended September 30, 2023 and 2022. As of September 30, 2023, there were 454,531 shares available for issuance under the 2017 ESPP.
Stock-based compensation expense
The Company uses the provisions of ASC 718, Stock Compensation, to account for all stock-based awards to employees and non-employees.
Stock-based compensation expense is recognized over the requisite service period, which is generally the vesting period, using the straight-line method.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
The following table presents stock-based compensation expense by award type included within the Company’s condensed consolidated statements of operations and comprehensive loss:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2023202220232022
Stock options$3,211 $3,901 $11,718 $11,952 
Restricted stock units694 1,365 4,647 3,832 
Employee stock purchase plan96 109 686 424 
Stock-based compensation expense included in total operating expenses$4,001 $5,375 $17,051 $16,208 
The following table presents stock-based compensation expense as reflected in the Company’s condensed consolidated statements of operations and comprehensive loss:
Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands)2023202220232022
Research and development$2,153 $2,890 $8,881 $8,569 
General and administrative1,848 2,485 8,170 7,639 
Stock-based compensation expense included in total operating expenses$4,001 $5,375 $17,051 $16,208 
As of September 30, 2023, there was $18.7 million and $15.1 million of unrecognized stock-based compensation expense related to unvested stock options and unvested RSUs, respectively, that is expected to be recognized over a weighted-average period of 1.8 years and 2.5 years, respectively.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:
Three Months Ended
September 30,
Nine Months Ended September 30,
2023202220232022
Risk-free interest rate4.4 %2.9 %3.8 %2.0 %
Expected dividend yield % % % %
Expected term (years)6.096.116.065.99
Expected stock price volatility113 %94 %103 %88 %
Expected volatility for the Company’s common stock is determined based on its historical volatility. The risk-free interest rate is based on the yield of U.S. Treasury securities consistent with the expected term of the option. No dividend yield was assumed as the Company has not historically and does not expect to pay dividends on its common stock. The expected term of the options granted is based on the use of the simplified method, in which the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term.
The fair value of RSUs is determined based on the closing price of the Company’s common stock on the date of grant.
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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
10. Net loss per share
Basic net loss per share of common stock is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without further consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding for the period determined using the treasury stock method.
For purposes of the diluted net loss per share calculation, stock options, unvested RSUs and warrants to purchase common stock are considered to be potentially dilutive securities, but are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive and therefore, basic and diluted net loss per share were the same for all periods presented.
The following table sets forth the outstanding potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares):
Three and nine months ended
September 30, 2023
Three and nine months ended
September 30, 2022
Stock options12,178,126 10,524,780 
Unvested restricted stock units4,122,365 1,870,682 
Warrants 22,590 
16,300,491 12,418,052 
11. Commitments
License agreements
During the three and nine months ended September 30, 2023 and the three months ended September 30, 2022, the Company did not record research and development expense related to non-refundable license payments. During the nine months ended September 30, 2022, the Company recorded research and development expense related to non-refundable license payments of $1.5 million.
During the three and nine months ended September 30, 2023, the Company did not record research and development expense related to development milestones. During the three and nine months ended September 30, 2022, the Company recorded research and development expense of $0.7 million related to development milestones associated with XMT-1660.

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Mersana Therapeutics, Inc.
Notes to condensed consolidated financial statements (continued)
(unaudited)
12. Restructuring
On July 27, 2023, the Company announced decisions to reprioritize its areas of focus and to discontinue its clinical development of UpRi following an evaluation of top-line data from the Company’s UPLIFT Phase 2 clinical trial of UpRi in patients with platinum-resistant ovarian cancer, which did not meet its primary endpoint. In connection with these decisions, on July 26, 2023 the Company’s board of directors approved certain expense reduction measures, including a reduction of approximately 50% of the Company’s then-current total employee base (the "Restructuring"). Affected employees were eligible to receive severance and benefit payments, notice pay and outplacement services in connection with the reduction.
The Company expects to incur a total of approximately $7 million related to severance and benefit payments, notice pay and outplacement services in connection with the Restructuring. The Company expects to incur a total of approximately $2 million related to contract terminations associated with the Restructuring. Restructuring costs incurred are included within restructuring expenses on the consolidated statements of operations and comprehensive loss.
The following table summarizes the charges incurred in connection with the Restructuring:
(in thousands)
Severance & Employee Related Costs
Contract Termination and Other Costs
Total Costs
Cumulative costs to date$6,425 $1,789 $8,214 
Costs incurred during the three and nine months ended September 30, 2023$6,425 $1,789 $8,214 
The following tables summarizes the charges incurred in connection with the Restructuring related to research and development activities and general and administrative activities:
(in thousands)
Three and nine months ended September 30, 2023
Research and development related
$4,927 
General and administrative related
$3,287 
Accrued restructuring costs, which are included in accrued expenses on the consolidated balance sheets, were as follows:
(in thousands)Severance & Employee Related Costs
Contract Termination Costs
Total Costs
Balance at December 31, 2022$ $ $ 
Additional expense
6,425 372 6,797 
Cash payments
(2,435) (2,435)
Other adjustments
(172) (172)
Balance at September 30, 2023$3,818 $372 $4,190 
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Item 2. 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 and the audited financial statements and the accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission, or SEC, on February 28, 2023.
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 on Form 10-Q, 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.
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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 over 20 years of industry learning in the ADC field to develop proprietary and differentiated technology platforms that enable us to develop ADCs designed to have improved efficacy, safety and tolerability relative to existing ADCs and other approved therapies. We believe that our innovative platforms and our proprietary payloads together enable a discovery pipeline for us and our collaborators. Our investments in our proprietary auristatin payload, as well as our proprietary STING (stimulator of interferon genes) agonist payload, together with the GMP supply chain established for Dolasynthen and Immunosynthen, all enable our ability to apply these platforms to new and different targets and antibodies to create new product candidates. We call this our product engine. Our ADCs in preclinical studies and clinical trials include first-in-class molecules that target multiple tumor types with high unmet medical need.
Our goal is to become a leading oncology company by leveraging the potential of our innovative and differentiated ADC platforms and the experience and competencies of our management team to discover and develop promising ADC product candidates and to commercialize cancer therapeutics that address unmet medical needs or provide significant benefits to patients.
On July 27, 2023, we reported top-line data from our Phase 2 UPLIFT clinical trial of upifitamab rilsodotin, or UpRi, and announced that UPLIFT did not meet its primary endpoint. UPLIFT was a single-arm clinical trial that enrolled platinum-resistant ovarian cancer patients with one to four prior treatment regimens. The primary endpoint for UPLIFT was the investigator-assessed objective response rate, or ORR, in the NaPi2b-positive population. NaPi2b-positive status was defined by a tumor proportion score, or TPS, of ≥75%. The lower bound of the confidence interval for the primary endpoint did not meet our goal of excluding a 12% ORR seen with standard-of-care single-agent chemotherapy. We are in the process of conducting an in-depth analysis of various factors to better understand the results, as well as the characteristics of patients who responded to UpRi therapy, particularly those whose responses were deep and durable.
In connection with our announcement of top-line data from UPLIFT, on July 27, 2023 we further announced that our primary focus moving forward would be on advancing product candidates and collaborations utilizing our next-generation ADC platforms, Dolasynthen and Immunosynthen. As a result, we are winding down UpRi-related development activities and our regulatory and commercial readiness efforts, which wind-down we expect to be substantially complete by the end of 2023. We have terminated our UP-NEXT and UPGRADE-A clinical trials of UpRi, on which the U.S. Food and Drug Administration, or FDA, had placed a partial clinical hold in June 2023 following our submission of an aggregate safety report of all patients dosed with UpRi evaluating bleeding events UP-NEXT was our Phase 3 clinical trial of UpRi as monotherapy maintenance treatment following treatment with platinum doublets in recurring platinum sensitive ovarian cancer. UPGRADE-A was a Phase 1 combination trial in which we explored combining UpRi with carboplatin, a standard platinum chemotherapy broadly used in the treatment of platinum sensitive ovarian cancer. If further analyses of data enable the identification of a path forward for UpRi, we will consider strategic alternatives for the asset, including partnering. We also announced that on July 26, 2023 our board of directors approved certain expense reduction measures, including a reduction of approximately 50% of our then-current employee base, or the Restructuring. The Restructuring is expected to be substantially complete by the end of 2023.
We continue to develop two ADCs, XMT-1660 and XMT-2056, leveraging our Dolasynthen and Immunosynthen platforms respectively. XMT-1660 is a B7-H4-directed Dolasynthen ADC designed with a precise, target-optimized drug-to-antibody ratio, or DAR, of 6 and our proprietary auristatin payload. We are currently enrolling patients in our multicenter Phase 1 trial investigating the safety, tolerability and anti-tumor activity of XMT-1660 in patients with breast, endometrial and ovarian cancers. We began dosing patients in August 2022 and are continuing to advance the dose escalation portion of the trial, including enrolling patients in backfill cohorts at clinically relevant doses. We plan to complete the dose escalation portion of the trial in 2023 and plan to initiate the dose expansion portion of the trial in 2024. The FDA has granted Fast Track designation to XMT-1660 for the treatment of adult patients with advanced or metastatic triple-negative breast cancer.
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XMT-2056 is a systemically administered Immunosynthen STING agonist ADC (DAR 8) that is designed to target a novel epitope of human epidermal growth factor receptor 2, or HER2, distinct from that targeted by either trastuzumab or pertuzumab, and to locally activate STING signaling in both tumor-resident immune cells and in tumor cells, providing the potential to treat patients with HER2-high or -low tumors as monotherapy and in combination with standard-of-care agents. We initiated a multicenter Phase 1 open-label trial of XMT-2056 in previously treated patients with advanced/recurrent solid tumors expressing HER2, including breast, gastric, colorectal and non-small cell lung cancers, in January 2023. In March 2023, we announced that this Phase 1 trial of XMT-2056 had been placed on clinical hold by the FDA following our communication to FDA that we were voluntarily suspending the trial due to a Grade 5 (fatal) serious adverse event, or SAE, that was deemed to be related to XMT-2056. The SAE occurred in the second patient who had been enrolled at the initial dose level in the dose escalation portion of the Phase 1 trial in previously treated patients with HER2+ recurrent or metastatic solid tumors. On October 31, 2023, we announced that the FDA had lifted the clinical hold on this clinical trial. We have lowered the starting dose in our Phase 1 dose escalation design and are working to resume enrollment in this trial.
We also have two earlier stage preclinical candidates, which we refer to as XMT-2068 and XMT-2175, that leverage our Immunosynthen platform.
We have entered into a global collaboration providing GlaxoSmithKline Intellectual Property (No. 4) Limited, or 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 Janssen, and Merck KGaA, Darmstadt, Germany, or Merck KGaA, and its affiliates 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. For the nine months ended September 30, 2023, our net loss was $152.1 million, compared to $159.3 million in the nine months ended September 30, 2022. As of September 30, 2023, we had an accumulated deficit of $806.8 million. We expect to continue to incur significant expenses and operating losses over the next several years as we:
continue clinical development and manufacturing activities for XMT-1660 and XMT-2056;
continue activities to discover, validate and develop additional product candidates, including XMT-2068 and XMT-2175; and
maintain, expand and protect our intellectual property portfolio.

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.
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In December 2022, we entered into a collaboration and commercial license agreement, or the 2022 Merck KGaA Agreement, with Ares Trading S.A., or MRKDG, a wholly-owned subsidiary of Merck KGaA, for the development and commercialization of ADC product candidates utilizing our Immunosynthen platform for up to two target antigens. MRKDG 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 their cost. MRKDG has the exclusive right to and is responsible for the further development and commercialization of these ADC product candidates. During the three and nine months ended September 30, 2023, we recognized $2.3 million and $7.9 million, respectively, of collaboration revenue related to the 2022 Merck KGaA Agreement.
In August 2022, we entered into a collaboration, option and license agreement, or 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, 2023 and 2022 and the nine months ended September 30, 2023 and 2022, we recognized $0.5 million,$0.7 million, $1.8 million and $0.7 million, respectively, of collaboration revenue related to the GSK Agreement.
In February 2022, we entered into a research collaboration and license agreement, or the Janssen Agreement, with Janssen for the development and commercialization of ADC product candidates utilizing our Dolasynthen platform for up to three target antigens. Janssen 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 Janssen's cost. Janssen 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, 2023 and 2022 and the nine months ended September 30, 2023 and 2022 we recognized $4.9 million, $4.9 million, $14.0 million, and $10.9 million, respectively, of collaboration revenue related to performance under the Janssen Agreement.
In June 2014, we entered into a collaboration and commercial license agreement, or the 2014 Merck KGaA Agreement, with Merck KGaA for the development and commercialization of ADC product candidates utilizing our Dolaflexin platform for up to six target antigens. Merck KGaA is responsible for generating antibodies against the target antigens, and we are responsible for generating Dolaflexin and conjugating this to such antibodies to create the ADC product candidates. Merck KGaA has the exclusive right to and is responsible for the further development and commercialization of these ADC product candidates. In May 2018, we entered into a supply agreement, or the Merck KGaA Supply Agreement, with Merck KGaA for the supply of materials that could be used for investigational new drug, or IND, -enabling studies and clinical trials. For each of the three and nine months ended September 30, 2023 and 2022, we recognized an immaterial amount of revenue related to the 2014 Merck KGaA Agreement and Merck KGaA Supply Agreement.
During the nine months ended September 30, 2023 and 2022 we recognized $2.5 million and $0.3 million, respectively, of revenue related to achievement of a development milestone and services provided, respectively, related to Asana BioSciences, LLC, or Asana Biosciences.
For the foreseeable future, we expect substantially all of our revenue to be generated from our collaboration agreements with GSK, Janssen, Merck KGaA and its affiliate MRKDG and Asana BioSciences. 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.
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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. We expect that our future research and development costs will continue to 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 all of 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. In light of our decision to discontinue further clinical development of XMT-1592, a Dolasynthen ADC that had been in a Phase 1 dose exploration trial in patients with ovarian cancer and non-small cell lung cancer, in the second quarter of 2022, all costs associated with our Dolasynthen platform were prospectively re-allocated to XMT-1660, which is now our lead Dolasynthen-based product candidate, following such decision. All external research and development expenses not attributable to our product candidates in clinical development are captured within preclinical and discovery costs. These costs relate to our product candidates XMT-2068 and XMT-2175 and additional earlier discovery stage programs and certain unallocated costs. The following table summarizes our external research and development expenses, presented by program as described above, for each of the three and nine month periods ended September 30, 2023 and 2022.
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Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)2023202220232022
UpRi external costs$9,107 $23,999 $45,208 $48,023 
XMT-1660 external costs4,342 4,158 11,241 10,879 
XMT-2056 external costs635 2,334 4,614 2,334 
Preclinical and discovery costs608 2,040 4,062 13,265 
XMT-1592 external costs34 409 434 3,198 
Internal research and development costs15,805 17,699 61,215 49,977 
Total research and development costs$30,531 $50,639 $126,774 $127,676 
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 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, on July 27, 2023 we announced our decision to discontinue the clinical development of UpRi. Consequently, we will allocate resources previously dedicated to this program into our next-generation ADCs and platforms, Dolasynthen and Immunosynthen. We expect to incur significant research and development expenses over the next several years as we continue our clinical development and manufacturing of XMT-1660 and XMT-2056, advance our preclinical pipeline and invest in improvements in our ADC technologies.
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 consulting services.
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We expect to incur significant general and administrative expenses over the next several years to support continued research and development activities, including increased costs related to fees to outside consultants and patent costs, among other expenses.
Restructuring expenses
Restructuring expenses consists primarily of severance and benefit payments, notice pay, outplacement services and contract termination costs. We estimate that we will incur at total of approximately $7 million in costs consisting of severance and benefit payments, notice pay, and outplacement services, and a total of approximately $2 million in costs related to contract terminations. During the three and nine months ended September 30, 2023, we recognized $8.2 million of such expenses. The Restructuring is expected to be substantially complete by the end of 2023.
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 and the accretion of debt discount. Interest income includes interest earned on cash equivalents and marketable securities.

Results of Operations
Comparison of the three months ended September 30, 2023 and 2022
The following table summarizes our results of operations for the three months ended September 30, 2023 and 2022, together with the changes in those items:
Three Months Ended
September 30,
Dollar Change
(in thousands)20232022
Collaboration revenue$7,698 $5,573 $2,125 
Operating expenses:
Research and development30,531 50,639 (20,108)
General and administrative12,894 14,573 (1,679)
Restructuring expenses8,214 — 8,214 
Total operating expenses51,639 65,212 (13,573)
Other income (expense):
Interest income3,302 708 2,594 
Interest expense(1,017)(880)(137)
Total other income (expense), net2,285 (172)2,457 
Net loss$(41,656)$(59,811)$18,155 
Collaboration Revenue
Collaboration revenue increased by $2.1 million, from $5.6 million during the three months ended September 30, 2022 to $7.7 million during the three months ended September 30, 2023, primarily due to an increase of $2.3 million in collaboration revenue recognized under the 2022 Merck KGaA Agreement.
Research and Development Expense
Research and development expense decreased by $20.1 million, from $50.6 million for the three months ended September 30, 2022 to $30.5 million for the three months ended September 30, 2023.
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The decrease in research and development expense was primarily attributable to the following:
a decrease of $14.8 million related to manufacturing and clinical development activities for UpRi;
a decrease of $2.8 million related to employee compensation (excluding stock-based compensation), primarily due to a reduction in headcount in connection with the Restructuring; and
a decrease of $1.8 million related to manufacturing and clinical development activities for XMT-2056.
Stock-based compensation expense included in research and development expense decreased by $0.7 million, primarily as a result of a reduction in headcount in connection with the Restructuring.
General and Administrative Expense
General and administrative expense decreased by $1.7 million, from $14.6 million during the three months ended September 30, 2022 to $12.9 million during the three months ended September 30, 2023. The decrease in general and administrative expense was primarily attributable to a decrease of $0.8 million related to consulting and professional services and a decrease of $0.3 million related to employee compensation (excluding stock-based compensation) related to a reduction in headcount in connection with the Restructuring.
Stock-based compensation expense included in general and administrative expense decreased $0.6 million, also primarily a result of a reduction in headcount in connection with the Restructuring.
Total Other Income (Expense), net
Total other income (expense), net increased by $2.5 million from $(0.2) million during the three months ended September 30, 2022 to $2.3 million during the three months ended September 30, 2023. The increase to the net balance was primarily due to an increase in interest income earned on marketable securities.
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Comparison of the nine months ended September 30, 2023 and 2022
The following table summarizes our results of operations for the nine months ended September 30, 2023 and 2022:
Nine Months Ended
September 30,
Dollar Change
(in thousands)20232022
Collaboration revenue$26,154 $11,893 $14,261 
Operating expenses:
Research and development126,774 127,676 (902)
General and administrative49,409 42,158 7,251 
Restructuring expenses8,214 — 8,214 
Total operating expenses184,397 169,834 14,563 
Other income (expense):
Interest income9,142 1,017 8,125 
Interest expense(3,025)(2,364)(661)
Total other income (expense), net6,117 (1,347)7,464 
Net loss$(152,126)$(159,288)$7,162 
Collaboration Revenue
Collaboration revenue increased by $14.3 million from $11.9 million during the nine months ended September 30, 2022 to $26.2 million during the nine months ended September 30, 2023, primarily due to increases of $7.9 million and $3.1 million in collaboration revenue recognized under the 2022 Merck KGaA Agreement and the Janssen Agreement, respectively.
Research and Development Expense
Research and development expense decreased by $0.9 million, from $127.7 million for the nine months ended September 30, 2022 to $126.8 million for the nine months ended September 30, 2023.
The decrease in research and development expense was primarily attributable to the following:
a decrease of $3.1 million primarily related to manufacturing activities for XMT-1660 and the Dolasynthen platform;
a decrease of $2.8 million related to manufacturing and clinical development activities for UpRi;
decrease of $2.1 million related to non-refundable license payments under our third-party licensing agreements; and
a decrease of $1.8 million related to manufacturing and clinical development activities for XMT-2056.
These decreased costs were partially offset by an increase of $4.7 million related to employee compensation (excluding stock-based compensation), primarily due to an increase in headcount prior to the Restructuring and an increase of $4.2 million related to consulting and professional fees.
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General and Administrative Expense
General and administrative expense increased by $7.3 million, from $42.2 million during the nine months ended September 30, 2022 to $49.4 million during the nine months ended September 30, 2023. The increase in general and administrative expense was primarily attributable to an increase of $3.9 million related to employee compensation (excluding stock-based compensation) related to an increase in headcount prior to the Restructuring and an increase of $2.9 million related to consulting and professional services.
Stock-based compensation increased $0.5 million also primarily a result of increased headcount prior to the Restructuring.
Total Other Income (Expense), net
Total other income (expense), net increased by $7.5 million from $(1.3) million during the nine months ended September 30, 2022 to $6.1 million during the nine months ended September 30, 2023. The increase to the net balance was primarily due to an increase in interest income earned on marketable securities.

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.
In May 2020, we established an ATM equity offering program, or the 2020 ATM, pursuant to which we were able to offer and sell to the public through Cowen and Company, LLC, or Cowen, as sales agent, up to $100.0 million of our common stock from time to time at prevailing market prices. During the nine months ended September 30, 2022, we sold approximately 11.7 million shares of common stock under the 2020 ATM, resulting in gross and net proceeds of $55.9 million and $54.8 million, respectively. As of September 30, 2022, there were no amounts remaining unsold and available for sale under the 2020 ATM.
In February 2022, we entered into a new sales agreement, or the February 2022 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. During the nine months ended September 30, 2022, we sold approximately 12.7 million shares of common stock under the February 2022 ATM, resulting in gross and net proceeds of $57.6 million and $56.5 million, respectively. During the nine months ended September 30, 2023, we sold approximately 0.3 million shares of common stock under the February 2022 ATM, resulting in gross and net proceeds of $1.6 million. As of September 30, 2023, there were no amounts remaining unsold and available for sale under the February 2022 ATM.
In November 2022, we entered into an additional sales agreement, or the November 2022 ATM, with Cowen, as sales agent, under which we are 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, 2023, we sold approximately 14.2 million shares of common stock under the November 2022 ATM, resulting in gross and net proceeds of $94.1 million and $92.2 million, respectively. Approximately $55.9 million remained unsold and available for sale under the November 2022 ATM as of September 30, 2023.
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On May 8, 2019, we entered into a loan and security agreement, or the Prior Credit Facility, with Silicon Valley Bank, or former SVB, which was subsequently amended on June 29, 2019, August 28, 2020 and August 27, 2021. On October 29, 2021, we entered into a loan and security agreement, or the New Credit Facility, with Oxford Finance LLC as the collateral agent and a lender, former SVB as a lender, and the other lenders from time to time a party thereto, or together 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. As of September 30, 2023, we have borrowed $25.0 million under the New Credit Facility, as amended on February 17, 2022, October 17, 2022, December 27, 2022 and March 23, 2023, and no additional borrowing amounts are available to us under the New Credit Facility, as amended to date. The New Credit Facility is secured by substantially all of our personal property owned or later acquired, excluding intellectual property (but including the right to payments and proceeds of intellectual property), and a negative pledge on intellectual property, which ensures that the Lenders' rights to repayment would be senior to the rights of the holders of our common stock in the event of liquidation. Upon entering into the New Credit Facility, we terminated all commitments by former SVB to extend further credit under the Prior Credit Facility and all guarantees and security interests granted by us to former SVB under the Prior Credit Facility.
As of September 30, 2023, we had cash, cash equivalents and marketable securities of $241.0 million. In addition to our existing cash, cash equivalents and marketable securities, we are eligible to earn milestone and other payments under our collaboration agreements with GSK, Janssen, Merck KGaA and its affiliate MRKDG and Asana Biosciences. Our ability to earn the milestone payments and the timing of earning these amounts are dependent upon the timing and outcome of our development, regulatory and commercial activities and, as such, are uncertain at this time.
Cash Flows
The following table provides information regarding our cash flows for the nine months ended September 30, 2023 and 2022:
Nine Months Ended
September 30,
(in thousands)20232022
Net cash (used in) provided by operating activities$(136,920)$1,866 
Net cash provided by (used in) investing activities99,735 (107,290)
Net cash provided by financing activities94,583 111,559 
Increase in cash, cash equivalents and restricted cash$57,398 $6,135 
Net Cash Provided by (Used in) Operating Activities
Net cash used in operating activities was $136.9 million during the nine months ended September 30, 2023 and primarily consisted of a net loss of $152.1 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 $17.1 million and net amortization of premiums and discounts on marketable securities of $4.2 million. Net cash provided by operating activities was $1.9 million for the nine months ended September 30, 2022 and primarily consisted of a net loss of $159.3 million, adjusted for changes in our net working capital, $128.4 million in deferred revenue related to the GSK Agreement and Janssen Agreement, and other non-cash items, including stock-based compensation expense of $16.2 million and depreciation of $0.6 million.
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Net Cash Provided by (Used in) Investing Activities
Net cash provided by investing activities was $99.7 million during the nine months ended September 30, 2023 as compared to net cash used in investing activities of $107.3 million during the nine months ended September 30, 2022. During the nine months ended September 30, 2023, net cash provided by investing activities consisted primarily of maturities of marketable securities, partially offset by purchases of marketable securities. During the nine months ended September 30, 2022, net cash used in investing activities consisted primarily of purchases of marketable securities, partially offset by maturities of marketable securities.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was $94.6 million during the nine months ended September 30, 2023 as compared to $111.6 million during the nine months ended September 30, 2022. During the nine months ended September 30, 2023, net cash provided by financing activities consisted primarily of proceeds from sales of common stock under our February 2022 ATM and November 2022 ATM of $93.5 million. During the nine months ended September 30, 2022, net cash provided by financing activities consisted primarily of proceeds from the use of our 2020 ATM and February 2022 ATM of $111.0 million.
Funding Requirements
We expect our cash expenditures to increase in connection with our ongoing activities, particularly as we continue the research and development and manufacturing of, initiate 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, 2023, we had cash, cash equivalents and marketable securities of $241.0 million. We believe our currently available funds will be sufficient to fund our current operating plan commitments into 2026. 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 scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our product candidates;
the scope, prioritization and number of our research and development programs;
the costs, timing and outcome of regulatory review of our product candidates;
our ability to establish and maintain collaborations on favorable terms, if at all;
the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we obtain;
the extent to which we are obligated to reimburse, or entitled to reimbursement of, clinical trial costs under future collaboration agreements, if any;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
the extent to which we acquire or in-license other product candidates and technologies;
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the costs of securing manufacturing arrangements for clinical and commercial production; and
the costs of establishing or contracting for sales and marketing capabilities if we obtain regulatory approvals to market our product candidates.
Identifying potential product candidates and conducting preclinical testing and clinical trials 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, as 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 agreements with GSK, Janssen, Merck KGaA and its affiliate MRKDG and Asana BioSciences, 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, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If 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
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, 2022, which was filed with the SEC on February 28, 2023.
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. 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 Conditions and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 28, 2023.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risks
We are exposed to market risk related to changes in interest rates. As of September 30, 2023, we had cash, cash equivalents and marketable securities of $241.0 million. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments, including cash equivalents and marketable securities are invested in U.S. Treasury obligations, commercial paper, corporate bonds and U.S. government agency securities. However, we believe that due to the short-term duration of our investment portfolio and low-risk profile of our investments, an immediate 100 basis points change in the prime rate would not have a material effect on the fair market value of our investments portfolio.
The interest rate on our New Credit Facility is sensitive to changes in interest rates. Interest accrues on borrowings under the credit facility at a floating rate equal to the greater of (i) 8.50% and (ii) the prime rate plus 5.25%. We do not currently engage in any hedging activities against changes in interest rates. As of September 30, 2023, there was $25.0 million outstanding under the New Credit Facility, and a potential change in the associated interest rates would be immaterial to the results of our operations.
Foreign Currency Exchange Rate Risks
We are currently not exposed to market risk related to changes in foreign currency exchange rates, but we may contract with vendors that are located in Asia and Europe and may be subject to fluctuations in foreign currency rates at that time.

Item 4. Controls and Procedures
Management’s Evaluation of our Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.
Changes in Internal Control over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become subject to various legal proceedings and claims that arise in the ordinary course of our business activities. We are not currently party to any material legal proceedings. Additionally, although the results of litigation and claims cannot be predicted with certainty, as of the date of this Quarterly Report on Form 10-Q, we do not believe we are party to any claim or litigation, the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business.

Item 1A. Risk Factors
Our operations and financial results are subject to various risks and uncertainties, including those described below. The following information about these risks and uncertainties, together with the other information appearing elsewhere in this Quarterly Report on Form 10-Q, and our 2022 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on February 28, 2023, including our consolidated financial statements and related notes thereto, should be carefully considered before making any decision to invest in our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time. If any of the following risks occur, our business, financial condition, results of operations and future growth prospects could be materially and adversely affected. We cannot provide assurance that any of the events discussed below will not occur.

Risks Related to Development and Approval of Our ADC Product Candidates
We are currently evaluating a limited number of ADC product candidates in clinical trials. A failure of any of our product candidates in clinical development would adversely affect our business and may require us to discontinue development of other ADC product candidates based on the same technology.
XMT-1660 and XMT-2056 are currently our only product candidates in clinical trials. Following our announcement in July 2023 that the data in our UPLIFT clinical trial of UpRi did not meet its primary endpoint, we announced our plans to wind-down UpRi-related development activities, and we have terminated our UPGRADE-A and UP-NEXT clinical trials of UpRi. Additionally, our clinical trial of XMT-2056 was placed on clinical hold by the U.S. Food and Drug Administration, or FDA, between March 2023 and October 2023 and has not yet resumed. While we have certain other preclinical programs in development, it will take additional investment and time, and regulatory clearance, for such programs to reach the clinical stage of development. In addition, we have other product candidates in our current pipeline that are based on the same platforms as XMT-1660 and XMT-2056. If a product candidate fails in development as a result of any underlying problem with our platforms, then we may be required to discontinue development of the product candidates that are based on the same technologies. If we were required to discontinue development of XMT-1660 or XMT-2056 or of any other current or future product candidate, or if XMT-1660 or XMT-2056 or any other current or future product candidate were to fail to receive regulatory approval or were to fail to achieve sufficient market acceptance, we could be prevented from or significantly delayed in achieving profitability.
Failure of a discovery program or product candidate may occur at any stage of preclinical or clinical development, and, because our and our collaborators' discovery programs and our product candidates are in early stages of preclinical or clinical development, there is a high risk of failure. We or our collaborators may never succeed in obtaining regulatory approval and generating revenue from such discovery programs or product candidates.
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The results from our preclinical studies of XMT-1660 and XMT-2056 and the early results from preclinical studies or clinical trials of any other current or future product candidates are not necessarily predictive of the results from our ongoing or future discovery programs, preclinical studies or clinical trials. Promising results in preclinical studies and early encouraging clinical results of a drug candidate may not be predictive of similar results in later-stage preclinical studies or in humans during clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in clinical trials after achieving positive results in earlier stages of clinical development, and we have faced and may again face similar setbacks. For instance, in July 2023, we announced that our UPLIFT Phase 2 clinical trial of UpRi did not meet its primary efficacy endpoint, despite promising efficacy data from our Phase 1b clinical trial of UpRi. Other companies’ setbacks have been caused by, among other things, preclinical findings made while clinical trials were underway or safety or efficacy events in preclinical or clinical trials, including previously unreported adverse events. We similarly have identified new safety signals as our clinical trials have advanced, such as our assessment that serious bleeding events appear to occur in patients who received UpRi at a higher rate than background, which assessment led us to submit an aggregate data safety report to the FDA in June 2023.
Similarly, the design of a clinical trial can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. In March 2023, we announced that the FDA had issued a clinical hold on our Phase 1 trial of XMT-2056 following our communication to the FDA that we wer